RBI sees 2003-04 GDP growth at 6%

The Reserve Bank of India said that the Indian economy was likely to grow by around 6 per cent in the current year to March 2004 as the monsoons were likely to help agricultural output grow by more than 3.1 per cent.

The weather office has predicted that rainfall during this year's monsoon, which runs from June to September, will be 96 per cent of the long-term average.

The Indian economic growth in the past year to March 2003 fell to 4.4 per cent from 5.6 per cent in the preceding year as the country's worst drought in 15 years caused farm output to shrink by 3.1 per cent.

The central bank said that it expected the inflation rate in the current year to be 5.0 to 5.5 per cent.

RBI cut the benchmark bank rate on Tuesday by a quarter percentage point to 6 per cent, the lowest level in more than three decades, to give a fresh impetus to the world's 12th largest economy.

The Reserve Bank of India cut the bank rate, its key interest rate signal, in its biannual Monetary and Credit Policy, with effect from the close of business on Tuesday, April 29. The bank rate was last at as low as 6 per cent in 1971.

It said it expected to hold the bank rate steady till its mid-year review of monetary policy in October.

The central bank also cut the cash reserve ratio -- the proportion of deposits banks must keep in cash with the central bank -- by a quarter percentage point to 4.5 per cent with effect from the two-weekly reporting period beginning on June 14, 2003.

But it said that it could advance the date when the cash reserve ratio cut goes into effect if there was an unexpected change in money market liquidity in the next few weeks.