Drought or not, FM sees 6%+ GDP

Drought or not, FM sees 6%+ GDP
The Economic Times, August 12, 2009, Page 9

Our Bureau NEW DELHI

THE economy will grow by more than 6% this fiscal year, finance minister Pranab Mukherjee said on Tuesday, a day after the met office cut its monsoon forecasts for the third time this year, triggering concerns a spreading drought across the country would cramp growth.

The Indian Meteorological Department on Monday said rains in the June-September season would be 87% of the average compared with its previous forecast of 93% on June 24, and this has sparked worries about sowing in the kharif season.

But Mr Mukherjee said the economy would be able to easily cope with the drought and urged against panic while conceding that deficient rains would reduce the kharif crop sowing by 20%.

“There’s no point in pressing the panic button. This country managed the century’s worst drought in 1987. We transported drinking water through railways. We organised fodder for the cattle. This country has the experience of handling the situation,” Mr Mukherjee said at the annual conference of chief commissioners and directors general of Income Tax.

A GDP growth of just around 6% would nevertheless bring economic growth estimates to the lower end of the government’s own forecasts, although closer to the Reserve Bank of India’s figure. The government’s economic survey had forecast GDP growth of at least 6.25% and as much as 7.75% if the global economy recovered. The economy expanded by 6.7% in the last fiscal, after growing by more than 9% in the preceding three years.

The 1987 drought had affected over 6,500 villages and 1.4 million hectares of land, with rainfall deficit estimated at over 19% then. This time around, 161 districts out of the country’s 604 districts have been declared droughthit. The government has already stepped up efforts to buy more sugar, banned the export of wheat and restricted rice shipments. “Fortunately, Punjab and Haryana have extensively used the ground water. In Bihar and certain other states, there are shortfalls,” Mr Mukherjee said.

He also expressed confidence that government would surpass its direct tax collections target of Rs 3.7 lakh crore for 2009-10. The finance minister emphasised that tax laws should be simple, stable and robust. “Tax rates should remain moderate and multiplicity of taxes, tax exemptions and deductions should be gradually phased out to improve tax compliance,” he said.