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  3. GDP forecast lowered to 7.5%, meeting fiscal deficit target a challenge: Govt

GDP forecast lowered to 7.5%, meeting fiscal deficit target a challenge: Govt

09 Dec 2011 Evaluate

The government has revised India’s economic growth downward for the current financial year on the back of slowdown in economic activities, high inflation in domestic economy and unfavorable conditions in global economy.

In the mid-year economic review, tabled in Parliament, the government said the economy is expected to grow around 7.5% sharply lower than the original estimates of 9%. It also expects that meeting the fiscal deficit target in the current year would be a challenge for the government, given the unfavorable conditions in domestic and global front.  

During the second quarter of the current financial year, Indian economy grew by 6.9%, which is slowest growth in last two financial years. As a result, India’s economic growth during the first half of 2011-12 fell to 7.4% compared to 8.85% in the same period of last financial year.

However, experts are of the view that with less than four months of 2011-12 still remaining, the full-year fiscal deficit may cross the budgeted target of 4.6% of gross domestic product (GDP). In the mid-year economic review, the finance ministry said that there is no denial that meeting the target of fiscal deficit will not be easy this year. The government is, however, determined to keep overshooting fiscal deficit target of 4.6% to as minimal as possible.

On the back of stubbornly high inflation, rising interest rates, the RBI’s anti-inflationary monetary policy standing, delay in vital policy reforms, ongoing debt crisis in euro-zone and economic slowdown in United States, Indian economy may not be able sustain its economic growth, which has been growing around 8% from last two financial year.

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