Hong Kong, Nov 20 (KNN) The growth in India is being affected by a drop in public and private investments, said Reserve Bank of India (RBI) chief Dr Raghuram Rajan but hoped that the recent surge in flow of foreign capital may reverse the trend.
 
He said this while speaking at a business event in Hong Kong on Friday. With factories running 30 per cent below capacity, there is little interest in private to invest in new projects, which in turn is hampering growth. Rajan aslo mentioned that public investment is also falling back.
 
The RBI has cut its growth forecast for the current fiscal year to 7.4 per cent from 7.6 per cent previously, well below the government's target of 8 to 8.5 per cent, but still above China.
 
Despite the slowdown in growth and investments, Mr. Rajan said strong foreign direct investment and some traction in infrastructure development may encourage private investments.
 
During the period from January to June, foreign direct investment (FDI) flows into India rose to $19.4 billion, up 30 per cent from a year earlier, indicated by the government as a sign of investors’ growing confidence in the country.
 
Earlier this month, India eased foreign direct investment norms in 15 major sectors, including mining and defence.
 
Indication to a sluggish demand, Rajan said, "Once we start seeing a little stronger demand, we will start seeing more projects being pulled out of the drawer."
 
An adversary of cheap money, Rajan agreed to cut the benchmark policy rate by a half percentage point to 6.75 percent in September, after months of pleading by government leaders and industrial groups for more stimuli.
 
He also mentioned that central Banks should avoid a cheap money policy which will lead to debt build-up in the global economy to a dangerous level. (KNN Bureau)