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  3. FM likely to scale down GDP estimate in mid-economic review

FM likely to scale down GDP estimate in mid-economic review

06 Nov 2012 Evaluate

Amid slowing economy with sluggish investments and industrial growth, the Finance Ministry might scale down the financial growth forecasts to 5.7-6% in its mid-term review of the state of economy to be tabled in Parliament by December.

The Reserve Bank of India (RBI), in its half yearly review of the monetary policy, had lowered the financial growth projection of the country to 5.8%, from the previous forecast of 6.5%, albeit in 2012-13 budget the envisaged estimate was 7.6% growth. The RBI had blamed global and domestic factors like poor investments and subdued demand for the scale down.

Even though, the first quarter of the current financial year has registered a sluggish economic growth of 5.5%, the Planning Commission officials has expressed confidence that the economy is likely to pick up growth in the second half of 2012-13. The financial growth had slipped to nine-year low of 6.5% in 2011-12.

It is also likely to revise the fiscal deficit target, which was pegged at 5.1% of the Gross Domestic Product (GDP) in the financial budget 2012-13. The Finance Ministry had revised the fiscal deficit projection to 5.3%, considering various adverse global and domestic developments, though various global rating agencies opined that it is likely to peak to 6.1%. The panel will also consider various measures to improve the Current Account Deficit (CAD) situation. While, Chidambaram has stressed that it could improve to 3.5% of the GDP in the current fiscal, from 4.2% a year ago.

The review will also consider the peaking inflation, considering current price situation amid global and domestic factors, including the impact of monsoon on crops. RBI had recently revised the March-end inflation estimate to 7.5%, from previous projected 7%. Amid continuing attempts to promote investments to contain inflation and take India to high growth trajectory, Chidambaram last week had come up with a five-year road map for fiscal consolidation.

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