Early signs of a rebound in the economy are “surely visible” and growth may touch 5.8 per cent in the current financial year, lifted by strong economy boosters in the last month’s Budget and a further softening in inflation, finance secretary Arvind Mayaram said on Thursday.
The RBI, though, was more conservative in its estimate of growth this fiscal, pegging it at 5.5 per cent in its annual report released in Mumbai today.
“I am very confident that we will achieve growth of about 5.8 per cent this fiscal…The Budget has very strong growth impulses,” he said at an Assocham event, adding that the upturn in the economy is already evident in industrial output and passenger vehicle sales that are showing a revival.
His comments come at a time when the Reserve Bank of India has predicted a growth of 5.5 per cent in 2014-15 while the Economic Survey last month had pegged GDP growth at 5.4 per cent to 5.9 per cent in the current fiscal. Economic growth has languished below 5 per cent in each of the last two financial years. The government will release gross domestic product (GDP) data for the first quarter on August 29.
Meanwhile, noting that inflation is now lowering the finance secretary also hoped that it would soon reach the Reserve Bank of India threshold paving way for a softening in the interest rate regime.
“Inflation is going to come down further and we hope that as the Governor in the recent credit policy stated, RBI will not hold interest rates high any longer than is necessary and I hope that threshold we will reach soon now,” he said.
The Index of Industrial Production (IIP) grew 3.5 per cent in the first quarter of this fiscal (April-June) after contracting by 4.8 per cent in the fourth quarter (January-March) of the last fiscal year. “It is true that the June industry output slowed to 3.4 per cent but if we decode the components of IIP, we see a surge in capital goods which were up 23 per cent, which means order books are picking up,” Mayaram said. The annual wholesale price inflation slowed to a five-month low of 5.19 per cent in July from June’s 5.43 per cent, while consumer price inflation accelerated to 7.96 per cent from 7.46 per cent.
Mayaram said the government is confident of containing the current account deficit to below 2.5 per cent of GDP in 2014-15.
… Reserve Bank sticks to more conservative stance at 5.5%
Mumbai: The economy is likely to grow at 5.5 per cent in the current fiscal in the wake of the improvement in manufacturing and investment, the Reserve Bank of India has said.
“Signs of improvement in mining and manufacturing activity, expected pickup in investment, improved availability of financial resources to private sector with lower draft of government on financial savings of the households amid fiscal consolidation, improved external demand and stabilising global commodity prices are expected to support recovery. However, downside risks could play out if global recovery slows, geopolitical tensions intensify or monsoon weakens again in the rest of the season,” the RBI said in its Annual Report.