The Hindu Business Line : Chawla predicts economic growth of over 6.5% this fiscal

Mumbai, Aug. 31 Growth in the Indian economy is slowly bouncing back and there are sure signs of a movement to higher trajectory, according to Mr Ashok Chawla, Union Finance Secretary.

Referring to the 6.1 per cent growth logged by the economy in the June quarter vis-À-vis 5.8 per cent in the previous quarter, Mr Chawla said, “There’s no stopping the process of financial sector reforms and innovation.” He was speaking at the launch of interest rate futures (IRF) on the National Stock Exchange here.

He predicted a growth of above 6.5 per cent in the fiscal year ending March 2010, as strength in manufacturing and services offset weakness in agriculture.

“With the re-launch and reincarnation of IRF with redesigned parameters, we hope the product addresses the deficiencies the market noticed in the earlier version. The IRF market should develop in such a manner that it covers the entire spectrum of the yield curve,” the Secretary said.

Ms Shyamala Gopinath, Deputy Governor, RBI, said, IRF in its earlier version did not take off as banks were only allowed to hedge their investment portfolio and were precluded from taking trading positions.

The new product is the culmination of extensive deliberations by the Technical Advisory Committee, Ms Gopinath said and added that she was optimistic that the product would succeed.

Following the launch of IRFs, she said, OTC interest rate swaps should evolve into a long-term market.

The Reserve Bank of India has so far managed the Government borrowing programme in a non-disruptive manner and has already completed a large part of the borrowing for the first half, the she said.

Speaking after the launch of trading in IRFs, Ms Gopinath emphasised that, “we should look at overall outcome of the borrowing programme and not just at interest rates.”

She also pointed out that the RBI has bought back 70 per cent of the bonds in the auctions under the Open Market Operation and will continue as earlier planned.

Ms Gopinath also clarified that banks are allowed to trade in interest rate futures on their own account, within the permissible limits and according to the provisions laid down by the RBI.