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The RBI Governor, Dr Bimal Jalan, addressing the captains of industry on ``Economic prospects and the Union Budget 2002-03'' in the Capital on Monday.

NEW DELHI, March 18

THE Reserve Bank Governor, Dr Bimal Jalan, today said that fiscal 2002-03 should witness a growth rate of 6-6.5 per cent.

Dr Jalan was of the view that this year should be better than 2001-02. "There are some positive signs. There has been a good monsoon. The country should be able to achieve a growth rate of 6-6.5 per cent in the coming year," he said addressing a conference on `Economic prospects and Union Budget 2002-03'.

The conference had been organised jointly by the Confederation of Indian Industry (CII) and the National Council of Applied Economic Research (NCAER).

The RBI Governor added that the economy's capability to withstand external and internal shocks was another factor that would contribute to sustained higher growth rates in the long-term.

Taking a medium-term view of the economy, the Governor pointed out there were several positive indicators including the fact that inflation levels were low, foreign exchange levels were high and the liquidity situation was "more than good".

Dr Jalan said the hype around the Budget should go. The Government should maintain certain continuity in major tax proposals; they should hold good for a period of 5-7 years with minor alterations mid-course during the annual budgetary exercise.

To further improve tax administration, Dr Jalan suggested simplification of the rules. This would also help bring down corruption and called on industry organisations to suggest methods to improve tax collections. On dividend taxation, which has been in the limelight since the Budget, Dr Jalan, while agreeing that it was a form of double taxation, felt that there were several pros and cons which would have to be looked at before any decision could be taken on the issue. In this context, Dr Jalan also spoke of the concept of `limited liability' and felt that the dividend tax was justified.

Dr Jalan added that the country was now in a better position to withstand external and domestic shocks in contrast to the situation during 1973-1985 when external situation affected the Balance of Payment situation and inflation rate and led to a money squeeze in the domestic market.

However, now the position had improved where even if all the non-resident Indian (NRI) deposits were withdrawn the country was unlikely to face a problem.

Dr Jalan was of the opinion that one of the biggest problems facing the system was that the delivery system was not performing to the expected levels.

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Jalan puts growth rate at 6-6.5%

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