Potential growth may have fallen to 7.5%: Subbarao

Last Updated: Tuesday, July 17, 2012 - 20:11

Mumbai: Reserve Bank Governor D Subbarao Tuesday said the country's potential growth rate may have fallen by at least a percentage point from the pre-2008 levels to 7.5 percent.

"Latest assessment suggests that potential output growth may have further fallen to around 7.5 percent," Subbarao said while speaking at the sixth Statistics Day at the RBI headquarters here.

The potential output is defined as the growth in the economy without fuelling inflationary expectations.

Subbarao said the country's potential growth rate, as per the RBI's own assessment, before the onset of the global credit crisis, was 8.5 percent, which slipped to eight percent during the crisis.

Official data in May showed GDP growth had fallen to a nine-year low at 6.5 percent in FY12, below the 6.7 percent clocked during the slowdown triggered by the global credit crisis.

"The uncertainty surrounding economic activity has heightened in the post-crisis period. India is no exception," Subbarao said.

He, however, said assessing the country's potential growth rate consistent with the central bank's objective of low and stable inflation is a "challenge".

Subbarao said the use of statistical techniques is very important in making assessments, which in turn is vulnerable to errors including the revision of GDP growth data from the estimated levels, uncertainties in productivity growth and absence of a unique methodology for determining the potential GDP growth.


First Published: Tuesday, July 17, 2012 - 20:11

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