Hyderabad: India's economy is improving and the country is hoping to achieve 5.5 percent, or little more, growth rate this year, said Reserve Bank of India (RBI) Governor Raghuram Rajan.
"Next year we will go into sixes and hopefully sevens the year after," he said while addressing students of Indian Business School (ISB) here Thursday.
Rajan said that without thinking of major reforms, the country can put the economy back on track to a reasonable level but reforms will be key to sustain the growth or to take it to a higher level.
While claiming that the economy is improving, he hoped that there will be more sustainable growth going forward.
Rajan, however, underlined the need to support the growth in a strong way by working on the financial side.
"The bottom line is we do seem to be picking up in growth. Our current account deficit is smaller and inflation numbers look lot healthier than they looked a few months ago," he said.
The central bank chief said there was some pickup of industrial growth but pointed out that Nokia shutting down its plant in Chennai made big difference to IRP numbers.
Rajan said while exports seem to have slowed down, the country is doing reasonably well in non-oil and non-gold exports with 6-7 percent growth. "This has been one of the strengths of the economy over last few months."
Noting the government is focusing on improving the framework of doing business, Rajan stressed the need to make easy for business to grow in terms of access to finance, regulations, and skilled labour.
"The government is working in all these areas. I don't see why we can't overtime reach double digit given our level of development," he added.
To a question, Rajan said Prime Minister Narendra Modi has an ambitious agenda for India. "The level of expectations is very high. We have to match it," he averred.
Stating that the government and RBI enjoy free frank and cordial relationship, Rajan said discussions are creating institutional structures like financial resolution authority to improve functioning of financial sector.
"We need financial resolution authority so that we can close down financial institutions poorly functioning one and resurrecting well functioning ones," he said
The RBI governor said discussions were also on on the monetary policy framework. Terming it as a far sighted move by the government, he said this will help reach the standards which other countries have achieved and also decide how to make objective of central bank more explicit.