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Finance Ministry is likely to lower economic growth projection for the current fiscal to 5.7-6 per cent in its mid-term review of the state of economy to be tabled in Parliament next month.
“A mid-term review will be presented in Parliament in mid-December by Finance Minister P Chidambaram. The budgeted projection for growth and Fiscal Deficit will definitely be revised,” a senior finance ministry official told PTI.
In the budget for 2012-13, the then finance minister Pranab Mukherjee had projected the economy to grow by 7.6 (+/— 0.25) per cent.
The growth projection for 2012-13 was optimistic and would have to be revised in wake of the developments that have taken place during the course of the fiscal, the official said, adding “it could be between 5.7 to 6 per cent“.
Recently, the Reserve Bank, in its half yearly review of the monetary policy, had sharply lowered this fiscal’s economic growth projection to 5.8 per cent, from 6.5 per cent estimated earlier. This in view of global and domestic factors like poor investments and subdued demand.
The growth rate during the first quarter of the current fiscal was 5.5 per cent and it was unlikely to improve significantly in the second quarter. However, experts including the Planning Commission officials are of the opinion that growth rate could improve in the second half of 2012-13.
Economic growth had slipped to nine-year low of 6.5 per cent in 2011-12.
The mid-year review will also revise the fiscal deficit target, which in the budget was pegged at 5.1 per cent of the Gross Domestic Product (GDP).
In view of the various adverse global and domestic developments, the Finance Ministry has revised the fiscal deficit projection to 5.3 per cent, though some experts like the global rating agencies are of the view that it could be as high as 6.1 per cent.
The review will also focus on improving the Current Account Deficit (CAD) situation. Chidambaram has already said that it could improve to 3.5 per cent of the GDP in the current fiscal, from 4.2 per cent a year ago.
As regards inflation, the review will provide an update on the current price situation, taking into account global and domestic factors, especially the impact of monsoon on crops.
The RBI had recently revised the March-end inflation estimate to 7.5 per cent, from 7 per cent projected earlier.
Chidambaram last week had unveiled a five-year road map for fiscal consolidation to promote investments, contain inflation and take India to high growth trajectory.
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