Centre to still see GDP in 7th heaven

Centre to still see GDP in 7th heaven
The Economic Times, July 1, 2009, Page 11

Deepshikha Sikarwar NEW DELHI

THE central government is likely to retain its GDP growth projection of 7% for 2009-10 as it expects a sharp recovery in the second half of the financial year.

The figure, forecast in the interim budget presented on February 16, is much higher than the World Bank forecast of 5.1%. Indeed, the economy had grown 6.7% in the previous fiscal compared to the World Bank’s estimate of 6.1%.

Though the prospect of poor rains has dampened the cautious enthusiasm, there is hope that recovery would be sharper in the second half, reflecting the growth across the world and making up for the lost steam in the first half, a government official told ET.

The stimulus packages unveiled by governments around the world are beginning to deliver and once demand revives in the developed world, which is seen post-September, the recovery would be faster, the official added. India too is running a fiscal expansionary policy. The interim budget pegged fiscal deficit at 5.5% of GDP in 2009-10. All these factors, together with the increased optimism, are the reason the government is retaining the 7% growth estimate in the economic survey and Budget.

Economic growth could be much higher in the next fiscal year at 8-8.5%, the official said. This is in line with the World Bank forecast that the economy will expand by 8% in 2010, faster than China’s projected growth at 7%. Ratings agency Fitch on Tuesday raised growth projection for India in 2009 to 6%. The government’s optimism is also based on the recovery shown by consumer goods, fastmoving consumer goods and cement. In April, industrial growth, as measured by the index of industrial production, turned positive at 1.4%, after remaining negative for the previous two months, with as many as 11 of the 17 industry groups showing a positive growth.