India seems to have come halfway through its period of economic slowdown,if official estimates are anything to go by. Painting an optimistic outlook,the finance ministry said today that economic growth is expected to pick up in the second quarter of the next fiscal and hover around seven per cent in the next fiscal. In our assessment,Indias period of downturn is expected to last between the second half of 2008-09 and first half of 2009-10, secretary economic affairs Ashok Chawla said,speaking to reporters outside North Block.
Pegging gross domestic product (GDP) growth at 7.1 per cent for the current fiscal,the ministry has indicated that growth may continue at the same level for the next year on the back of a gross capital formation of 40 per cent of GDP in the current fiscal.
In order to finance its enhanced public expenditure this fiscal,the government may also borrow more. There is a need to borrow more and this has been indicated in the supplementary budget presented in Parliament. The government has an additional expenditure of Rs 1,50,000 crore to make this year and borrowings will be in line with the requirement, said Arvind Virmani chief economic advisor in the ministry of finance.
The cash and debt management group comprised of the government and the Reserve Bank of India (RBI) is meeting tomorrow to assess the required borrowings, Ashok Chawla said. The government may also consider a further fiscal stimulus package,if the need be,after reviewing the impact of the two packages announced earlier,he added.
Investment inflow into the country is expected to remain high due to a strong public sector and domestic demand. Moreover,with services continuing to grow at over 9 per cent,investor confidence is likely to remain strong,added Chawla.
Agricultural growth forecast remained rather low for the year as the base last year was very high, Virmani said. As per the advance estimates,the growth rate of agriculture will be 2.6 per cent compared to 4.9 per cent last fiscal.
Industry has taken a hit and we are watching the situation closely. Measures will be taken as and when required, Ashok Chawla said. Industrial growth estimates are pegged at 4.8 per cent for the current fiscal vis-à-vis a growth of 8.1 per cent registered by the sector last year. Services are also slightly down with estimates hovering at 9.6 per cent for the year compared to 10.9 per cent recorded last fiscal.