The PMEAC, in its Economic Outlook for 2009- 10 submitted to Prime Minister Manmohan Singh on Wednesday, said India’s GDP growth rate could range between 6.25 per cent and 6.75 per cent and on an average could grow at around 6.5 per cent. PMEAC chairman C. Rangarajan said the ongoing global financial crisis and the effect of the drought on the country’s farm output are key factors impacting growth.
India’s farm output, which accounts for as much as 18 per cent of GDP, is expected to shrink by two per cent.
“ On the whole, we must say the Indian economy has weathered the international financial crisis very well. It has been able to hold on to a rate of growth which is perhaps the second fastest in the world,’’ Rangarajan told journalists. India’s economic growth slowed down to 6.7 per cent during 2008- 09, from an over nine per cent growth rate in the preceding three years, in the wake of the global financial crisis.
The PMEAC has expressed concern over surging food prices and expects the overall rate of inflation to go up to six per cent by the end of the current fiscal.
Source: Mail today GDP growth pegged at 6.5%
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By ugesh sarkar, Section Indian Economy
Posted on Sat Oct 24, 2009 at 03:12:12 AM EST
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The council is clearly not in favour of an increase in interest rates when the RBI reviews its monetary policy on October 27 as it could choke growth.
“ The monetary policy has been accommodative in the past several months ... the stance will have to change, but will have to wait depending on the growth performance and inflationary pressures on the economy,” he said.
Rangarajan, however, said rising inflation, mainly driven by increasing food prices, is a disturbing element in the Indian economy. Foodgrain production has been estimated to be 223 million tonnes this year, which is 11 million tonnes less than last year.
He also emphasised the need to bring down the high fiscal deficit, which is projected to be 10.09 per cent of GDP after including the deficits of the state governments. Rangarajan said the current level of fiscal deficit is not sustainable over a long period of time. I N 2010- 11, some effort will be made to bring it down in a measured way and the process of fiscal consolidation will have to start from next year,” he pointed out.
The Central fiscal deficit was 6.2 per cent in FY’ 09 and is projected to be 6.8 per cent of GDP in the current financial year.
The PMEAC in its outlook has projected industrial growth ( including construction) at 8.2 per cent in 2009- 10 compared to 3.9 per cent in the previous fiscal.
“ In the short run, the most important thing is to manage the price situation. We need to ensure that the rabi crop is good and therefore all measures need to be taken to enhance the the rabi crop,” Rangarajan said.
For the medium term, the PMEAC said focus should be on improving farm productivity and actively explore fuel sources like natural gas and nuclear energy.
The advisory council sees exports touching $ 188.9 billion and imports at $ 306 billion during the current financial year.
External capital inflows during the fiscal are expected to be $ 57.3 billion and net addition to foreign exchange reserves will be around $ 31.6 billion, the report states.
The current account deficit in the country’s balance of payments has been projected at two per cent of GDP in 2009- 10 against 2.6 per cent in 2008- 09.
Projected investment rate in 2009- 10 is unchanged from last year at 36.5 per cent. The savings rate may edge up marginally to 34.5 per cent of GDP from 33.9 per cent during 2008- 09, the report added.
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