Economy passing through critical situation: Rangarajan

Amid peaking inflation rate and slowing economic growth in the country, the Prime Minister's Economic Advisor C Rangarajan has commented that the nation is now facing a critical situation and urged for policy actions to contain expenditures, especially subsidies, to aid the country to gear up to achieve the potential growth rate. He emphasized that curtailing subsidies is to put a control on increasing fiscal deficit, while raising revenue-GDP ratio should also be in focus, to ensure stable revenue for the nation’s development.

The fiscal deficit had dipped to 4.7% of GDP in 2010-11 while the projection was to fall to 4.6% in 2011-12. The present deficit is 5.9% of GDP, albeit it has been forecasted to dip by 5.1% of GDP in the current fiscal. He opined that the present economic growth is only due to the new economic policy, as it removed all the hurdles in the way of economic growth and pointed that it’s different from 1991 slow down.

He also noted that there was three years of high inflation due to certain severe supply constraints, particularly of agricultural products, thus the need for containing inflation and balance of payments has become more vital to trigger the economic growth, while re-emphasized that high growth does not warrant a higher level of inflation. He also stressed on the need for increasing coal production, and a need for strong economic policy.

By adding further, he also pointed out that the farm economy and the power sector are facing major challenges these days, and called for necessary actions to revitalize the traditional crop agriculture which is very much important to food security and farm income and urged to take more aggressive path of capacity creation in the power sector.