GDP growth to miss target

BY OUR CORRESPONDENT

New Delhi

Aug. 13: It is official that India’s GDP growth will witness a significant slowdown this fiscal. The Prime Minister’s economic advisory council (EAC) in its review has projected that the economy will grow by 7.7 per cent this fiscal against nine per cent last year.

In the last three years, the Indian economy had witnessed an unprecedented growth of nine per cent. Now, the EAC has projected that agriculture growth will slow down to two per cent as against 4.5 per cent growth in the last fiscal. Industry will grow by 7.5 per cent against 8.5 per cent last year. Whereas, services will grow by 9.6 per cent against 10.8 per cent last fiscal.

"Centre’s major focus is to control inflation as a result the growth is likely to suffer," said the new EAC chairman, Mr Suresh Tendulkar. The EAC said that a number of factors inimical to growth have intensified in 2008. Mr C. Rangarajan, the outgoing chairman of the EAC, said that external environment globally is not conducive for the growth. He said that financial crisis in US, high commodity price particularly in case of oil have an impact on the Indian economy.

On inflation, Mr Rangarajan said that there is also a possibility that inflation could even touch 13 per cent in the coming days. He said that co-ordinated policy action can bring down inflation to eight to nine per cent by March 2009. "A lot of effort will have to be made to bring inflation to these levels," said Mr Rangarajan. The EAC said that tight monetary stance is necessary to control inflation.

"Implementation of the rural employment guarantee programme and Sixth Pay Commission’s report, we think, will take total deficit to five per cent. This is a very large fiscal deficit," Mr Rangarajan said. The EAC had earlier in January projected a growth rate of 8.5 per cent for 2008-09, while the RBI in its recent policy forecast a growth rate of eight per cent. EAC said that savings will be lower this fiscal due to worsening government finances and erosion in corporate profit.

However, the finance minister, Mr P. Chidambaram, showed confidence that GDP will grow close to eight per cent this fiscal. "If the Prime Minister’s economic advisory council pegs it economic growth at 7.7 per cent, I can confidently say it will be close to eight per cent," said Mr Chidambaram.