Reserve Bank of India on Saturday warned high fiscal deficit and low credit off-take were impeding economic growth but on the back of good monsoon and industrial revival, the country could witness over six per cent growth this fiscal.
"Fiscal deficit is a problem from the growth point of view. We are using a lot of domestic savings for current consumption and that is not desirable," RBI Governor Bimal Jalan, who relinquishes his office in October after six years, said in New Delhi.
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"Nobody is happy at six per cent growth" Jalan said about the economic performance, adding it would be definitely better than six per cent mainly due to good monsoon and industrial revival.
"The exact numbers, the RBI will re-formulate and re-project in October when all the data comes in," he said in an interview to NDTV channel.
Aided by a steady growth of the manufacturing sector, the industrial production grew by 5.3 per cent during the first quarter of the current fiscal.
"Last year, we grew at four per cent despite drought. Yes, we are dependent on rains. One wishes we were less dependent on the rains," Jalan said.
Less credit off-take was worrisome in terms of growth. "If we had more investments in infrastructure, we would have grown at a trajectory, which is fast and I am sure it will happen," he said.
On the softer interest rate regime, Jalan said it would depend on the inflationary pressures in the economy and that he would not hazard a guess.
"I will not make a forecast. If we are able to maintain around the present levels, then the interest rates are sustainable, but if inflation rate shoots, then obviously interest rates are unsustainable because one gets into a negative territory," he said.
But "positive one, two or three per cent inflation is not bad for growth," Jalan added.
Inflation fell to a 27-week low of 4.09 per cent, shedding 0.5 per cent during the latest reported week with primary and manufactured products becoming cheaper.
On surging foreign exchange reserves, now at about $85 billion, the RBI Governor said, forex reserves was not a problem for the Indian economy.
"It is like any other resource and we must use it well. There is no problem in the foreseeable future and any contingencies will be taken care of," he said.
On rupee, which is appreciating these days on the back of high forex reserves, Jalan said there had to be flexibility in exchange rates.
"Some element of flexibility and some element of intervention" was needed, he said, adding the question was how much of flexibility and intervention.
There was varying opinion, he said but "we have taken a stand that we don't want to have a fixed exchange rate target. The rupee is flexible but we would like the movement to be orderly and not very volatile."