The Hindu Business Line : Outlook for 2008-09: Optimism, but with caution as the watchword, says Chidambaram

In a clear pointer that the 2008-09 Union Budget would be growth-oriented, the Finance Minister, Mr P. Chidambaram, on Thursday asserted that the Government would continue to provide a conducive investment climate and manage the macro-economy to facilitate non-inflationary growth so that “our growth story is not affected.”

Favouring India

“If you wish me to sum up in one phrase the outlook for 2008-09, I would say ‘optimism, but with caution as the watchword’. There are a number of things going in favour of India. We need to capitalise on these opportunities while at the same time responding to the evolving situation in the global economy in a manner that our growth story is not affected,” Mr Chidambaram told reporters after placing the Economic Survey 2007-08 in the Lok Sabha today.

Inflation

Mr Chidambaram said that he was optimistic about growth and containment of inflation in the coming year, even while admitting that there were downside risks to growth arising from the slowdown and possible recession in the global economy.

“Given the high level of food, oil and other commodity prices in international markets, the risks to inflation remain. Thus, keeping inflation under control in an uncertain global environment will be one of the major challenges in 2008-09,” Mr Chidambaram said.

The Finance Minister said that the economy has decisively moved to a higher growth trajectory during the five years to 2007-08. The Economic Survey tabled in the Lok Sabha today projected economic growth of 8.7 per cent for 2007-08. The survey also says that overall inflation is projected to decline from 5.6 per cent in 2006-07 to 4.1 per cent in 2007-08.

“The higher economic growth trajectory and the projected growth of 8.7 per cent in 2007-08 is based on a quantum jump in savings and investment rates. Given the solid foundation of domestic investment and saving, we are confident of meeting the Eleventh Plan (2007-08 to 2011-12) target of 9 per cent average growth,” he said.

The survey has projected an increase in the rate of investment (GCF) in 2007-08. The rate of investment was 35.9 per cent of GDP in 2006-07. Similarily, the savings rate has scaled new highs reaching 34.8 per cent of GDP in 2006-07.