The Economic Advisory Council (EAC) to Prime Minister on Friday estimated India’s Gross Domestic Product (GDP) growth rate to 7.1% by the end of this fiscal year on the back of ongoing recession and global meltdown.
In 2007-08 outlook, PM’s panel had estimated country’s growth rate at 9% which had been later revised to 7.7% in July 2008, and now in the last quarter of 2008-09 FY, EAC has estimated further lower GDP rate.
Blaming to worsening global economic condition and its rising effect on Asia’s third largest economy, Dr. Suresh D Tendulkar, Chairman of EAC said, “Slowdown caused by painful adjustment to abrupt changes in the international economy.”
However, the members of EAC has expressed hope for the second half of 2009 taking note of international crude oil prices and slowing down of prices of other essential commodities. India may grow at 7 to 7.5 percent in the second and third quarter of next fiscal while the current trend is likely to continue in the first quarter of 2009-10, said a government press statement.
RBI and the government are expecting to bring down the inflation rate to a comfort level of 3 to 4% by the end of this FY, while on the other hand, EAC fears that the combine fiscal deficit may have to above 10% of GDP in 2008-09, which would be a panic situation and uneasy to handle.
The panel has also projected the investment rate and current account deficit rate for the FY 2008-09, and it is likely to be 35% (2.5% lower as against the last year) and 1.9% of the GDP respectively while saving rate is also likely to be lower due to larger negative savings of government, said panel in the release.
But, external payments situation is expected to be reasonably comfortable, the panel added.
In terms of FY 2009-10, EAC forecast that India will bounce back strongly in the second half of year 2009 on account of rising agricultural sector in which investment has grown from 2% to 3%, and economy has other favourable factors like comfortable external payments situation, resilience of the Indian enterprises, healthy bank balance sheets, strong and non-leveraged domestic consumption growth, and dominant dependence on domestic savings for financing investment.
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