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Expect 8% growth in two-to-three year period: Montek Singh

11 Jan 2013 Evaluate

Expecting economic growth of second half of current fiscal to be better than the first half, Planning Commission Deputy Chairman Montek Singh Ahluwalia has said that the GDP expansion is likely to improve to 8% in the next two to three years from below 6% at the moment. While addressing an event, Ahluwalia said, ‘India is growing just below 6 per cent at the moment and the government hopes to take it to 8 per cent over a two-to-three year period which is not an unreasonable expectation.’

Terming HSBC's GDP projection at 5.2% for the current fiscal as incorrect, Ahluwalia said the second half is likely to be better than the first half. He also said, further deceleration of GDP growth is unlikely and growth will be higher than 5.4%, HSBC forecast is excessively pessimistic.

Citing slowdown in the economy turning to be more structural than cyclical, HSBC slashed India’s growth forecast for this fiscal year and next fiscal to 5.2% and 6.2% from 5.7% and 6.9% respective projections earlier. In its report, HSBC also underscored more time for reforms process and another three years for Indian economy to return to 8% growth on a sustained basis. HSBC had previously cut its India growth forecasts for fiscal 2013 and 2014 in September, last year.

On the expected diesel price hike, Ahluwalia said, ‘I am not speculating on what government might do in the next week or two. That is something the ministry of petroleum has to decide ... Some graduated adjustment is necessary but exactly when and by how much, is really left to the discretion of the oil ministry.’

Further, the 12th Plan document had made it clear that it was important to align domestic fuel prices with global prices as the under-recovery on petroleum was very large. Moreover, on the widening Current Account Deficit (CAD), he said, the government would bring it down to about 3% in the next few years and 2% by 2016-17, the last year of the 12th Plan. In the July-September quarter of 2012-13, CAD, which is difference between exports and imports after taking into account remittances and other payments, was 5.4%.

On the whole, the recent decisions on the economic front seem to suggest that more tough decisions to set the economy right are on the cards. Already, in a politically sensitive decision, the government hiked railway fares with effect from January 21, its first hike since 2004. Further, many more steps are expected in the forthcoming budget, with several of them already taken by the government.

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