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October 30, 2002 | 1733 IST
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India's financial conditions stable: Jalan

Reserve Bank of India Governor Bimal Jalan said on Wednesday that the country's financial conditions are stable despite the effects of drought and asserted that the bank's latest monetary policy had created the right environment to ensure steady investment demand in the economy.

"We are fairly confident that despite the drought, the financial conditions are stable, both on the external and domestic front," said Jalan, a day after he presented RBI's mid-year review of Monetary and Credit Policy.

Referring to the bank rate, Jalan told reporters in Mumbai that it was in a "comfortable zone". "Liquidity in the banking system certainly makes it more competitive", he added.

Jalan said the objective of the policy was to "create conditions" for investments with a tilt towards a softer interest regime.

"We have signalled it by reducing the bank rate, as a cut with a low inflation environment level helps to create conditions for investments", Jalan told newspersons in Mumbai.

On lowering of projections for Gross Domestic Product to 5-5.5 per cent from 6-6.5 per cent, Jalan said it was mainly because of the drought.

Asked about achieving 7-8 per cent growth as per the Tenth Plan, the RBI Governor said, "The critical thing is the investment side."

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