The country’s central bank head Bimal Jalan on Saturday said during the last financial year ending 31 March 2003, the economy had done well despite a withering drought, compounded by external factors including a global slowdown and the invasion of Iraq.
Last year's drought in 14 states suppressed demand, pulling down industrial growth as well as overall economic growth, according to the 62-year-old Governor of the Reserve Bank of India (RBI).
Despite this, management of the economy had been good last year, Jalan told the NDTV news channel, adding, "Our resilience to handle problems has improved.
"Things are much more stable... much better after a crisis," he said.
"We are dependent on rains. One wishes we were less dependent on the rains," he added.
He did not give a specific growth rate, but said India's economic position was strong enough to see growth rates of 6.0 or 6.5% in the medium term.
But Jalan warned that a high fiscal deficit was impeding economic growth. "Fiscal deficit is a problem from the growth point of view. We are using a lot of domestic savings for current consumption and that is not desirable," he said.
"We are dependent on rains. One wishes we were less dependent on the rains"
With marginal improvement in total receipts and containment of expenditure, the federal government's fiscal deficit stood at 386 billion rupees ($8 billion) in the first quarter of this year.
A government report last week said the fiscal deficit was equivalent to 25% of budget estimates as against the corresponding figure of 29% the previous year.
Jalan described India's foreign exchange reserves of about 85 billion dollars as "comfortable."