No decision on revising the economic growth projections for 2011-12: Finance Minister

04 Jul 2011 Evaluate

The government is not planning to revise the Gross Domestic Product (GDP) growth projections downwards for the current financial year. Finance Minister Pranab Mukherjee said the government has not taken any decision yet on revising the economic growth projections for 2011-12.

In the economic survey, the government had estimated that India’s GDP growth would be between 8.75% to 9.25% this financial year. However, due to high inflation and other factors, RBI in its monetary review for the fiscal, pegged the GDP growth at 8%, lower than the 8.5% recorded in the previous fiscal. With RBI, other international agencies like International Monetary Fund and World Bank also did downward revision of their forecast. Recently, the global rating agency Fitch has also downturned its growth estimated for India in 2011 to 7.7% from 8.3% previously.

The Fitch report says the economic outlook is likely to remain somewhat clouded by persistently high inflation. The headline inflation measured by wholesale price index (WPI) has remained around 9%, above the central banks comfort level, and controlling inflation has been the top priority of the RBI. From March 2011, Apex bank has increased its key policy rates by 10 times in its attempt to cool down inflation.

This non-stop hike in policy rates has increased the cost of the capital resulting in slow pace of investment in the industry. The affects of this increased cost of capital is visible in Index for Industrial Production (IIP), for month of April 2011 stood at 6.3% as compared to an above 16% growth in the April 2010.

During his United States visit, Finance minister had said that the Indian economy is likely to maintain the growth momentum of the previous fiscal in 2011-12 as well. During last financial year, Indian economy has registered a growth of 8.5%.