India is unlikely to achieve the projected growth target of 7.1% in this fiscal year, said Ministry of Statistics and Programme Implementation Secretary Mr Pronab Sen in an ‘Asset Reconstruction Summit’ organised by the Confederation of Indian Industry (CII) on Wednesday.
This is because the economic situation is going to be deepen and in the third quarter India has achieved just 5.3% growth rate, said Sen and added, ‘to meet the target, India would have to grow at 7.4% rate, which does not seem to be possible.’
His estimation came just after another estimation of International Monetary Fund that projected India’s growth rate to 6.25% for fiscal year (FY) 2008-09 and 5.25% for the FY 09-10 on the back of worsening economic meltdown.
IMF on Wednesday painted a gloomy growth picture of India and expected further slow down in next fiscal because of deepening global economic meltdown.
However, IMF also expressed hope that Indian economic situation may improve if government eases further money supply in situation of continuous declining inflation. “There is scope for further monetary easing, in light of projected decline in inflationary pressures and the need to reinforce confidence and sustain bank credit,” said IMF in its released report on Wednesday.
Moreover, IMF also warned that additional expenditure and more tax relieves could raise public debt to unsustainable levels.
Supporting to Pronab’s view, Abhijit Sen, a member of the planning commission stated, ‘stimulus packages announced by the government and the Reserve Bank of India are expected to push up growth rate by 1.5 to 2 percentage points from the expected levels.’
The plan panel has undertaken the worst-case analysis without adding the impact of stimulus package, as assessing that it would put no impact. On that basis, the growth rate may go up to 5%.
If stimulus packages show their impact, it can add 1.5 to 2 percent in the revised projection. ‘This will take the growth rate to between 6.5 and 7%,’ he added.
Mr. Sen, however, warned that if the measures did not show a positive impact, a fresh set of stimulus measures might have to be taken up by the new government.
The chief economic adviser to the finance minister Arvind Virmani said, ‘if agriculture fares well then it is possible to reach the target of 7.1% but if agriculture growth dips below to 2.6%, the forecast would have to be adjusted.’
Farms were one of the worst performers in the third quarter, expanding by just 2.2 per cent.
Commenting upon inflation, chief statistician Pronab Sen said that the country could witness “disinflation”, which is inflation being negative, and not deflation i.e. decline in prices simultaneously in contraction to demand.
“By March end, inflation is going to be in negative territory. It is surely not deflation but it is disinflation,” Pronab said.
Inflation that crossed the 13-year high mark over 12 per cent in last October has now slipped to 2.43 per cent for the week ended February 28, 2009.
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