Indian economy to grow around 8% in 2011-12: PM

Amid of uncertainties in the global economy, Prime Minister Manmohan Singh expects Indian economy to grow around 8% or a little more in the current financial year. The Prime Minister’s growth expectation for the current fiscal is in line with the estimates of the Reserve Bank of India (RBI) and the Prime Minister's Economic Advisory Council (PMEAC). However, it is below than the 8.5% estimated by the finance ministry and other policymakers.

Experts are of the view that, RBI’s nonstop hike in its key policy rates has begun to show its impact on the India’s growth. In order to curb inflation in the Asia’s third largest economy, since March 2010, the RBI has increased its short term lending and borrowing rates for 11 times. The RBI has said taming inflation is its top priority and it is ready to sacrifice some growth in the short term to calm prices.  

'Our own economy has also slowed down compared to last year, and this year's growth may be around 8% or a little more, at best,' Singh said. The government has consistently been revising their estimates on growth and inflation on account of the uncertainties in international situation, which deteriorated following the debt problems in the US and Europe. Earlier, hovering international crude oil price had put significant pressure on the government’s fiscal health and fueled inflation in the domestic economy.

In July, the PMEAC, chaired by former RBI governor C Rangarajan had revised downward its GDP projection for the current fiscal year at 8.2% from 9% made earlier. Prime Minister said the transition to 9% growth in the 12th Plan period is an ambitious target given the state of the global economy. 'Since we have already achieved about 8.2% in the 11th Plan period, it may seem that a transition to 9% growth is not difficult. However, it is in fact a very ambitious target given the current global economic situation, which is full of uncertainties about the prospects in industrialized countries and their implications for global capital markets,' Prime Minister said.

By adding further he said, the economy has the inherent strength to achieve 9% growth but cautioned that some difficult decisions needed to be taken to reach the goal.  By giving example of other Asian economies, he said many countries have grown rapidly at 9-10% per year for two or three decades before slowing down and cited the examples of Japan, Korea and the rapid growth of China.

'India is now capable of repeating the performance of this group of Asian countries. But we must remember that it will not happen automatically, by simply proceeding on a business-as-usual basis. There are many difficult challenges we must overcome to achieve the transition to 9% growth,' Prime Minister added. Since last year, the government is trying to fend off allegations of corruption. This has halted important economic reforms which are required to achieve robust growth.