With the current account deficit dipping and overall economic growth numbers looking better than expected, so optimistic of recovery is what Finance Minister P. Chidambaram that he sees a growth of 5 per cent in 2013-14.

Sharing his optimism, he said “We are going through a period of stress… but things will become better.” Chidambaram was talking to reporters on a day after the RBI reported a significant reduction in the current account and trade deficits and HSBC’s Purchasing Manager Index suggested a recovery in the manufacturing sector.

The good news comes on the back of the Statistical Ministry announcing last week that the GDP growth for the three-month period ending September 30 was estimated higher at 4.8 per cent against 4.4 per cent in three-month period ending June 30.

Taking cue from these indicators, the Finance Minister hoped for a better performance in the second half of 2013-14.

“We are doing better than 2012-13 except the services sectors. If this sector shows brisk growth in the last two quarters, it will help in the recovery,” he said.

He reiterated that the twin deficits, current account and fiscal, will be within the target. Talking about current account deficit, he said that the balance of payment (BOP) position has improved significantly. Trade deficit in goods has also improved. “These are good signs. We are on target to contain CAD. We will also contain fiscal deficit at the target of 4.8 per cent of GDP,” he claimed.

Although some doubts on fiscal deficit have been raised especially after over 84 per cent of the target has been exhausted in the first seven months (April-October), Chidambaram was still optimistic.

The monthly data do not give the exact picture as expenditures are front loaded while revenues are back loaded, he argued.

At the same time “there is some momentum in the beginning of the second half. We will push for tax collections to speed up and once revenue collections speed up, we are confident that we will contain the fiscal deficit,” he said.

Revenue boost

He explained that although the gross tax collection grew only by 9 per cent in the first seven months, but in October alone, this jumped by 19.5 per cent, personal income tax rose by 28.9 per cent while service tax saw an increase of 26.1 per cent. He also said that the net tax and non-tax revenue up to October is 43.2 per cent of the Budget Estimate, exactly the same as last year.

He also mentioned that spectrum auction will bring in Rs 40,000 crore. Similarly, there is no change in the disinvestment target and he expressed confidence that it will be met.

However, the Finance Minister could not hide its displeasure on inflation. “Unless food inflation is tamed, I cannot really predict how much inflation will be going forward,” he said.

Inflation worries

Stating that the principal responsibility of taming food inflation and all instruments for that lies with State governments, he alleged that for years, they simply shrugged their responsibility and blamed the Centre.

“I am not saying the Union Government is not responsible, but principal responsibility in dealing with food inflation lies with State governments. They must take action against hoarding and profiteering. They must take action on removing the barriers to trade. They must encourage people to improve supply change to bring produce to shelves,” he suggested.

> shishir.s@thehindu.co.in