India may grow by 6.75% this year: PM's panel

India may grow by 6.75% this year: PM's panel
Business Standard, October 22, 2009, Page 8

BS Reporter / New Delhi

Despite bad monsoon affecting farm sector output.

The Prime Minister’s Economic Advisory Council (PMEAC) today projected that the country’s economy might grow by 6.5 per cent in 2009-10, and even touch 6.75 per cent, despite bad monsoon affecting farm sector output.

The PM’s panel, however, said the growth was not likely to be lower than 6.25 per cent. On Tuesday, Prime Minister Manmohan Singh said the country would clock 6 per cent-6.5 per cent growth during the current year, despite drought.

India’s economic growth slowed to 6.7 per cent during 2008-09, from over 9 per cent recorded in the previous three years, on account of the global financial meltdown.

Though PMEAC has projected the agriculture sector to decline by 2 per cent, against 1.6 per cent growth in the previous year, the 6.7 per cent growth in gross domestic product (GDP) would primarily be led by 8.2 per cent growth in the industry (including construction) that rose only 3.9 per cent in 2008-09.

The services sector would grow by 8.2 per cent, which is lower than 9.7 per cent growth registered last year, PMEAC said in its economic outlook for 2009-10.

PMEAC Chairman C Rangarajan, however, noted that inflation, which is hovering around 1 per cent, was likely to rise to 6 per cent by March 2010, which was a cause of concern for the government.

“In the short-term, managing inflationary risks, particularly food price inflation, is the biggest challenge to be faced by our policymakers,” he said.

The council has estimated foodgrain production to be 223 million tonnes (mt), a shortfall of 11 mt from last year, due to a 22.7 per cent deficiency in the south-west monsoon. It said though there were large acreage losses under kharif foodgrain, mainly rice, the rabi crop was expected to be good.

The PM’s panel also projected a consolidated fiscal deficit of 10.9 per cent. The Central fiscal deficit was 6.2 per cent in 2008-09 and is projected to be 6.8 per cent of the GDP in the current fiscal.

“In 2010-11, some effort will be made to bring it (fiscal deficit) down in a measured way and the process of fiscal consolidation will have to start from next year,” Rangarajan added.

The council said increase in fiscal deficit was not due to the stimulus package but on account of additional outlay on subsidies, pay revision, loan waiver and increased coverage of NREGA.

Govinda Rao, a member of PMEAC, said the government might not exceed its borrowing target for the year as the disinvestment proceeds would give it an additional cushion. The council expected exports and imports to touch $188.9 billion and $306 billion, respectively, this year. It estimated the current account deficit at 2 per cent of the GDP, against 2.6 per cent last year.