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India to grow at 7.5% for 2011-12: Eco review
In a sharp contrast from the earlier projection of 9 per cent GDP growth by the Economic Survey, the mid-year analysis of the Indian economy, has downwardly revised economic growth for 2011-12 to 7.25 per cent to 7.75 per cent.
The mid-year analysis of the Indian economy was presented on Friday in Parliament.
“The analysis of several data series and simple macro-econometric modeling lead us to forecast GDP growth of 7.5 per cent during 2011-12,” the Government said in the mid-year analysis.
Global financial crisis and tight domestic monetary policy have contributed to the slowdown of the Indian economy, which grew by 7.3 per cent in the first six months of the current financial year that ends on March 31.
“We expect some revival next year but the outlook remains mixed. If Europe slides into a proper recession, with all the attendant financial contagion that will no doubt affect other nations, the entire world economy will slow down and we could also be impacted,” the mid-year analysis said.
However, at the same time, the analysis pointed out that since the fundamentals of the Indian economy are strong and if Europe and US remain stable then it should be possible to get back to the long-term growth target of 9 per cent beyond 2012-13.
The mid-year appraisal says, going by the present trend of receipts and Expenditure, meeting the fiscal deficit target of 4.6 per cent in 2011-12 is a major challenge.
“The Government is, however, determined to keep the overshooting of the fiscal deficit target of 4.6 per cent (of GDP) to as minimum as possible,” the document said.
On high rate of price rise, the Government expects that with demand side pressure moderating following withdrawal of fiscal stimulus and tightening of credit, overall WPI inflation is likely to decline December onwards.
“The current fiscal may end with headline inflation of around 7 per cent,” it said.
It further said “maintaining the growth momentum in the economy with price stability is one of the biggest policy challenges that India is facing in recent times,” the report added.
In the mid-year review, the Government, however, said it expects improvement on price front. But it will depend on strong measures to boost supply side of food and agriculture and remove bottlenecks.
Expressing concern over slow pace of moderation of headline inflation, the Government said it has started easing and the decline is expected to continue.
The average wholesale price inflation during April-October 2011 was 9.6 per cent as compared to 9.9 per cent in the same period last year.
It further said the Centre’s fiscal policy for 2011-12 remains on the consolidation track, even though there may be a small transgression this year.
“There can be no denial that meeting the target will not be easy this year. The Government is, however, determined to keep overshooting fiscal deficit target of 4.6 per cent to as minimal as possible,” the review said.
The Government said that mopping up Rs 40,000 crore through disinvestment is a “stiff task” amid volatility in the capital markets even as it is looking at other options, like buyback of shares by PSUs, to meet the target.
“With the present trend and prevailing scenario in the capital market, achieving the disinvestment target of Rs 40,000 crore during the remaining period of 2011-12 would be a stiff task,” said the Mid-Year Analysis, 2011-12, tabled in Parliament.
The Government also said RBI would intervene in the forex market only in case of volatility.
In a sharp contrast from the earlier projection of 9 per cent GDP growth by the Economic Survey, the mid-year analysis of the Indian economy, has downwardly revised economic growth for 2011-12 to 7.25 per cent to 7.75 per cent.
The mid-year analysis of the Indian economy was presented on Friday in Parliament.
“The analysis of several data series and simple macro-econometric modeling lead us to forecast GDP growth of 7.5 per cent during 2011-12,” the Government said in the mid-year analysis.
Global financial crisis and tight domestic monetary policy have contributed to the slowdown of the Indian economy, which grew by 7.3 per cent in the first six months of the current financial year that ends on March 31.
“We expect some revival next year but the outlook remains mixed. If Europe slides into a proper recession, with all the attendant financial contagion that will no doubt affect other nations, the entire world economy will slow down and we could also be impacted,” the mid-year analysis said.
However, at the same time, the analysis pointed out that since the fundamentals of the Indian economy are strong and if Europe and US remain stable then it should be possible to get back to the long-term growth target of 9 per cent beyond 2012-13.
The mid-year appraisal says, going by the present trend of receipts and Expenditure, meeting the fiscal deficit target of 4.6 per cent in 2011-12 is a major challenge.
“The Government is, however, determined to keep the overshooting of the fiscal deficit target of 4.6 per cent (of GDP) to as minimum as possible,” the document said.
On high rate of price rise, the Government expects that with demand side pressure moderating following withdrawal of fiscal stimulus and tightening of credit, overall WPI inflation is likely to decline December onwards.
“The current fiscal may end with headline inflation of around 7 per cent,” it said.
It further said “maintaining the growth momentum in the economy with price stability is one of the biggest policy challenges that India is facing in recent times,” the report added.
In the mid-year review, the Government, however, said it expects improvement on price front. But it will depend on strong measures to boost supply side of food and agriculture and remove bottlenecks.
Expressing concern over slow pace of moderation of headline inflation, the Government said it has started easing and the decline is expected to continue.
The average wholesale price inflation during April-October 2011 was 9.6 per cent as compared to 9.9 per cent in the same period last year.
It further said the Centre’s fiscal policy for 2011-12 remains on the consolidation track, even though there may be a small transgression this year.
“There can be no denial that meeting the target will not be easy this year. The Government is, however, determined to keep overshooting fiscal deficit target of 4.6 per cent to as minimal as possible,” the review said.
The Government said that mopping up Rs 40,000 crore through disinvestment is a “stiff task” amid volatility in the capital markets even as it is looking at other options, like buyback of shares by PSUs, to meet the target.
“With the present trend and prevailing scenario in the capital market, achieving the disinvestment target of Rs 40,000 crore during the remaining period of 2011-12 would be a stiff task,” said the Mid-Year Analysis, 2011-12, tabled in Parliament.
The Government also said RBI would intervene in the forex market only in case of volatility.
