Projected Growth Rate Scaled Down to 5.7-5.9 per cent

The Government of India has reduced the projected growth rate for the current financial year from the previous estimate of 7.6 per cent to the revised estimate of 5.7-5.9 per cent.

It may be recalled that in October 2012 the IMF reduced the projected growth rate for India in 2012 from 6% to 4.9%.

The Mid-Year Economic Analysis placed before the Parliament stated that the economy has to register a growth rate of 6 per cent to achieve this revised growth rate.

Raghuram Rajan

Briefing reporters on the Mid-Year Economic Analysis, Raghuram Rajan, Chief Economic Advisor to the Government of India, said: “We can not be satisfied with this (5.7-5.9 per cent) rate of growth. So, we are not at the end of set of steps we need to take… we are at the end of the beginning. Further steps include a good confidence inducing budget, speeding up clearance for projects, and further steps in capital market reform.”

The Mid-Year Economic Analysis said that the government would strive to limit fiscal deficit to 5.3 per cent of GDP as against 5.1 per cent proposed in the budget. The Analysis stated: “There are reasons to believe that the slowdown has bottomed out and the economy is headed towards higher growth in the second half of the fiscal. Agriculture is expected to improve, because of better prospects, with rabi crops benefiting from greater moisture content in the soil and dominance of irrigated wheat and rice crops.”

The report further said: “Consequently, it is reasonable to expect that the current account deficit as a ratio of GDP would be lower than what it was in 2011-12. Uncertainty, on account of disinvestment receipts and likely higher subsidy requirement, does make it a challenging task to adhere to the overall fiscal deficit target during 2012-13.”

The analysis stated that further decrease in inflation is possible by the last quarter of the financial year and that it is “expected to moderate to 6.8-7 per cent level.”

The Mid-Year Economic Analysis further stated that subsidies on Petroleum, Food, and Fertiliser have increased to about Rs.1.42 lakh crore in the first half of the current fiscal year from Rs.95.190 crore in the same period last year.

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