FM says growth may fall to 7.5 %, rules out stimulus
New Delhi, Dec 4: Finance minister Pranab Mukherjee has said growth could moderate to 7.5% in the current financial year, but has ruled out any fiscal stimulus.
“I am modest. I am not saying that I will be reaching the figure which I projected earlier during the budget - 9% plus or minus 0.25%... I am reducing it to around 7.5%,” Mukherjee said at a media summit in the capital on Friday. Private analysts have already lowered Indian’s growth forecast to 7%- 7.5% after the economy expanded 7.3% in the first half of the fiscal and 6.9% in the second quarter.
Mukherjee’s assessment was based on improved second half of 2011-12. “Going forward, I am confident that we will be recovering some of the loss in our growth momentum and may end the year over 7.5%,” he said. Chief economic advisor Kaushik Basu also seconded minister’s views, saying slowdown was a temporary phenomenon.
“Yes, we are going through a couple of months of slowdown... I expect the economy to begin to do better even before the end of this fiscal year,” Basu said. Slackening investments amidst high interest rate regime is seen as one of the major reasons for slowdown in economic activities in the country.
“This is a temporary downturn. I expect a pick-up, not a sharp pick, in the final quarter of this year so India should be growing much faster in the final quarter than the second quarter,” Basu said.
But Mukherjee made it clear that the government, already on the brink of missing its fiscal deficit target of 4.6% of GDP, could not provide any stimulus to pump prime the economy as it did in 2008-09.
“I am not in a position to provide that level of fiscal stimulus that we provided in 2008-09. But certain policy changes can improve the situation little bit which we are doing,” he said.
The government had launched three stimulus packages when the global crisis hit Indian shores in 2008 to generate domestic demand and provide some succour to industrial sector to arrest deceleration in the economy that clocked 6.8% in 2008-09. Mukherjee said the projection of around 9% growth for the current financial year was based on the kind of recovery and resilience the Indian economy showed in 2008-09 and in the subsequent years.
Mukherjee expressed hope the government would be able to make national consensus on key economic reforms, which are crucial to boost growth. On the problem of inflation, the finance minister ascribed this to the improved purchasing power of the people as a result of the sustained high economic growth.
Lastupdate on : Sun, 4 Dec 2011 21:30:00 Makkah time
Lastupdate on : Sun, 4 Dec 2011 18:30:00 GMT
Lastupdate on : Mon, 5 Dec 2011 00:00:00 IST
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