The Hindu Business Line : Economy may grow close to 7%: Rangarajan

The Indian economy might grow close to 7 per cent this fiscal riding on the back of a good showing in manufacturing and services sectors, Dr C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council (PMEAC), has said.

The council had in October pegged its GDP growth forecast for the current fiscal at 6.5 per cent. With the Indian economy returning a better-than-expected Q2 GDP growth rate of 7.9 per cent, there are strong indications that it will revise upwards its GDP growth estimate for 2009-10.

“We will review in January our growth estimates. We had earlier said 6.5 per cent. Probably it could be higher…. It could be close to 7 per cent”, Dr Rangarajan told reporters on the sidelines of an event organised by NCAER and Australian Government here on Tuesday.

Dr Rangarajan, however, noted that the council would need to assess the impact of decline in agricultural growth before taking a call on an upward revision in GDP growth outlook for 2009-10.

Agriculture sector grew a modest 0.9 per cent in second quarter this fiscal, lower than growth rate of 2.7 per cent in Q2 last year.

This sector had recorded a lower growth in Q1 too at 2.4 per cent (3 percent).

Asked whether the strong Q2 GDP performance will compel the Government to go in for an early exit of fiscal stimulus, Dr Rangarajan said that the fiscal policy will remain as it is till end March 2010.

“A decision on what to do after March 2010 will be taken at the time of budget”, Dr Rangarajan said.

Monetary policy

On the monetary policy side, Dr Rangarajan said that the RBI's focus will now be on taming inflation.

He highlighted the seasonal decline in prices during November and December and noted that RBI would do well to watch out for this before taking a call on an appropriate policy action.