Subir Gokarn sees signs of accelerating growth in FY13

Excerpts from Reporter's Diary on CNBC-TV18 Watch the full show »

It has been a great start to 2012, especially for Indian equities. The end of last year was a rather negative scenario. But things started moving up early January onwards. With the global situation still tense, hopes of a Greek debt swap and investors with growing risk-on appetites in equity markets are proving that sentiment is slowly changing for the better.

Global markets are pausing ahead of the eurozone finance ministers meeting tomorrow as well as US January inflation data on Friday. The global situation a few months back was worrisome, with an escalating eurozone debt situation, crude oil conundrums which was not a good developement for liquidity infusion as well as domestic woes in our own backyard.

Headline inflation, political upheavals, scams, etc were beginning to outshine the India growth story. "There has been deceleration because of a slowdown in investment, interest rates have been raised to high levels which were a deterrent to investment."

However, the deputy governor of the Reserve Bank of India, Subir Gokarn says positive newsflow emerging from the US and others indicates a recovery is on the cards for markets. "We do have a beginning of a solution with the Greek parliament approving the restructuring arrangement."

Speaking at the IIFL 2012 India Conference, Gokarn is witnessing signs that growth is getting back on track in this fiscal. "The baseline scenario is starting to show that the signs of growth are now bottoming out."

According to him, interest rates have been a contributing factor in growth deceleration. In January, the RBI cut the CRR rate, leaving market analysts and corporate India hopeful that the interest cycle have peaked.

Hopes of an interest rate cut in March are eagerly being watched out for by the market and investors.

Gokarn says there are risks to growth coming from the other factos that have contributed to the deceleration this year. There are issues relating to the rebalancing of the public expenditure and global risks as well. "So while the risk profile is significant and something we should be conscious of, there are signs that there is acceleration in the growth rate in FY13."

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