Indian economy to grow at 6.4%,says PMEAC

Economic growth rate had slipped to decade's low of 5 per cent in 2012-13.

Written by PTI | New Delhi | Published: April 23, 2013 12:01:02 pm

Improvement in performance of agriculture and manufacturing sectors is expected to push the economic growth rate to 6.4 per cent in 2013-14 from 5 per cent in the previous fiscal,PM’s economic advisory panel said today.

“Economy will grow at higher rate from now. We projected growth rate of 6.4 per cent in the current fiscal”,Prime Minister’s Economic Advisory Council (PMEAC) Chairman C Rangarajan said while releasing the Economic Review for 2012-13 here.

Economic growth rate had slipped to decade’s low of 5 per cent in 2012-13 mainly on account of the impact of the global financial woes.

Rangarajan hoped that the GDP estimate for 2012-13 would be revised upwards from 5 per cent estimated in February by the Central Statistical Organisation (CSO).

The improvement in the growth rate in the current fiscal,he said,would mainly be on account of better performance of agriculture,industry and services sectors.

The agriculture sector,he said,was likely to grow at 3.5 per cent compared to 1.8 per cent in the previous fiscal. In case of industry and services sectors,the growth rates have been projected at 4.9 per cent (3.1 per cent in 2012-13) and 7.7 per cent (6.6 per cent),respectively.

Rangarajan said the action taken by the government to speed up project clearances since September would be visible in the current fiscal.

On the spiralling current account deficit (CAD),Rangarajan said it is likely to come down to 4.7 per cent of the GDP in 2013-14 from about 5.1 per cent in the previous fiscal.

The CAD,which is the difference between inflow and outflow of foreign exchange,shot up to an historic high of 6.7 per cent of the GDP for the quarter ended December 2012.

Observing that controlling CAD remains government’s main concern,Rangarajan said,”it is also vitally necessary to encourage exports of both merchandise and services”.

He hoped that with inflation coming down,peoples’ appetite for gold,the import of which along with petroleum

products had added to the pressure on CAD,will also diminish.

The government,he said,would have to maintain an attractive return in financial assets for bringing down the

demand of gold.

Also,”price and subsidy reforms in petroleum products need to be completed to control our oil import bill”.

On the price situation,PMEAC said inflation continues to remain high,but there are definite signs that wholesale price index (WPI) based inflation is coming down.

It has pegged the inflation at around 6 per cent in 2013-14.

The provisional figure for inflation at the end of 2012-13 is 5.96 per cent.

“Non-food manufacturing inflation remains around the comfort zone. As inflation comes down,it will create more space for monetary policy to support growth,” said the Prime Minister’s economic adviser.

He further said policy and administrative actions such as the recently constituted Cabinet Committee on Investment can help overcome obstacles in the speedy execution of projects.

“While even existing rates of investment should enable us to grow at 7.5 to 8 per cent over the short term,a return to higher levels of savings and investment can take us back to the very high levels of growth which we had seen earlier,” he said.

Rangarajan said if India grows at 8-9 per cent per annum,”we will graduate to the level of a middle income country by 2025″.

The PMEAC has projected higher inbound FDI at USD 36 billion during 2013-14. The net FDI inflow in 2012-13 was USD 18 billion (USD 26 bn inbound and USD 8 bn outbound).

“Outbound FDI is also expected to increase,resulting in net FDI inflow of USD 24 billion (this fiscal),” PMEAC said.

PMEAC further said the road map for fiscal consolidation has been well laid out and government has shown its

determination to contain the fiscal deficit.

“While in the short run,we should take such actions that are necessary to encourage capital flows,over the medium term,we need to bring down the current account deficit to moderate levels,” Rangarajan added.

The fiscal deficit for the current year is expected at Rs 5.42,499 crore.

The Review also said the total central subsidies are expected to go down to Rs 2,31,084 crore in 2013-14 largely

owing to pruning down of petroleum subsidies which have been the major cause of fiscal deficit targets being missed in the past.

The subsidies stood at Rs 2,57,654 crore or 2.6 per cent of GDP in the last financial year.

Among the issues that needs to be addressed include speedy project clearances; reducing CAD; managing the

capital account; improving net energy availability; containing inflation and reforms in agricultural marketing and supply chains,PMEAC said.

“The next decade will be a crucial decade for India. If we grow at 8 to 9 per cent per annum,we will graduate to the level of a middle income country by 2025.

“It is once again a faster rate of growth which will enable us to meet many of our important socio-economic

objectives,” Rangarajan added.

Following are the highlights of the Economic Review presented by the Prime Minister’s Economic Advisory Council (PMEAC) today.

* Economy projected to grow at 6.4 pc in 2013-14.

* Decline in growth appears to have bottomed out.

* Global growth would continue to remain at modest levels.

* GDP estimates by CSO for 2011-12 and 2012-13 could be revised upwards.

* Investment and savings rates have come down

* Investment rate estimated at 35.8 pc of GDP in 2012-13.

* Domestic savings rate pegged at 30.8 pc of GDP last fiscal.

* CAD estimated to decline to 4.7 of GDP (USD 100 bn) in FY14 from 5.1 pc in FY13 (USD 94 bn).

* Merchandise trade deficit estimated at USD 213 bn (9.9 pc of GDP) in FY14 as against USD 200 bn (10.9 pc of the GDP) in FY13.

* NRI remittances estimated at USD 113 bn (5.3 pc of GDP) in FY14 versus USD 105.8 bn (5.7 pc of GDP) in FY13.

* For 2013-14,FDI inflows estimated at USD 36 bn.

* WPI inflation expected at 6 pc this fiscal.

* PMEAC says slowing inflation will create space for RBI to cut interest rate.

* Central subsidies expected to go down to Rs 2,31,084 crore in FY14 from Rs 2,57,654 crore in 2012-13.

* FY14 revenue targets realisable.

* PMEAC says more needs to be done to facilitate new investment.

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