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Amid the debate over continuation of the stimulus package, the government today forecast economic growth at 7.2 per cent for the current financial year, a shade lower than 7.5-8 per cent projected by Prime Minister Manmohan Singh and Finance Minister Pranab Mukherjee.
Lower than anticipated growth projection for 2009-10 comes at a time when the RBI has started tweaking key monetary policy instruments to contain inflation.
The projections for 2009-10, put out by the Central Statistical Organisation in its advance estimates for the national income is, however, higher than 6.7 per cent recorded by the economy a year ago.
Farm sector output is expected to contract 0.2 per cent, while the services sector will record moderate growth, it said. Manufacturing is estimated to grow by a robust 8.9 per cent this fiscal, which may prompt the government to withdraw stimulus in a phased manner.
“We should say stimulus has succeeded and we should begin to phase it now,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said even as industry vehemently pitched for continuation of the tax concessions.
Ficci Secretary General said if monetary tightening is combined with withdrawal of stimulus measures, it would be dangerous for the economy and employment.
Evading a direct reply on the issue, Finance Secretary Ashok Chawla said, “In terms of what the future policy framework is going to be, I think you will have to wait for the Budget,” he said. ZCZC
Bolstered by a stunning 7.9 per cent growth in the second quarter of this fiscal, the Prime Minister said the economy is likely to grow by 7.5 per cent during 2009-10.
“In the current financial year, the growth rate of economy is likely to be 7.5 per cent,” he said last week.
The Finance Ministry in its mid-term review had projected the economy to grow by 7.75 per cent this fiscal and the Reserve Bank had pegged it at 7.5 per cent.
Finance Minister Pranab Mukherjee had said mid-year review has projected the economy to grow by 7.75 per cent this fiscal, which can be rounded off to 8 per cent.
According to CSO, farm and allied activities are pegged to shrink by 0.2 per cent this fiscal against 1.6 per cent growth a year ago. The output is likely to decline due to fall in Kharif production on account of drought and floods that hit several parts of the country.
The estimated growth this fiscal will be driven by robust manufacturing sector expansion against 3.2 per cent in FY’09. The sector had got various stimulus doses from the government in the wake of global financial crisis.
Trade, hotel, transport and communication are estimated to rise by 8.3 per cent against 7.6 per cent last year and construction by 6.5 per cent in FY’10 from 5.9 per cent in FY’09.
However, other services like financing, insurance, real estate and business services are likely to witness fall in expansion and grow by 9.9 per cent this fiscal against 10.1 per cent last fiscal and community social and personal services by 8.2 per cent compared with 13.9 per cent.
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Final Growth Numbers To Be Better: Finance Secy
Finance Secretary Ashok Chawla said the economy could finally grow higher than the 7.2 per cent estimated by the official statistical department today.
“This is an advance estimate. What normally we see when the final numbers come out for the third and fourth quarters is that there would be an upward bias and we are sure that this time also the same is going to happen,” Chawla told reporters. u
On being asked about the implication of the growth estimate on the fiscal stimulus measures, he said, “in terms of what the future policy framework is going to be, I think you will have to wait for the budget,” he said.
The Finance Ministry pegged GDP growth at 7.75 per cent in the mid-term economic review, while the RBI projected it at 7.5 per cent in its quarterly monetary policy review last month.
Chief Economic Advisor Kaushik Basu said the growth estimate confirms that the country has clearly turned from the downturn. “It (advance estimate) confirms what earlier was a matter of speculation that the country has clearly turned from the downturn,” Basu said.
Further, Basu said India is one of the three countries in the G-20 group who are experiencing positive growth.
“Of the 20 G-20 countries, 17 have had zero or negative growth. Only 3 countries have had a positive growth and a positive growth of 7.2 per cent in this global scenario speaks very well for India,” he said.
Speaking on agricultural sector, which has been a drag on the entire economy since drought last year, Chawla said he is “very comfortable and reasonably happy” that agriculture is just about zero and not in the negative territory.
According to official estimates, the agricultural sector is projected to decline by 0.2 per cent in the current financial year, better than worse estimates given by others.
“Agriculture is just about zero, it has not gone into the negative territory. Once the fourth quarter numbers come, we are hopeful that the agriculture number will be slightly better,” Chawla said.
However, he said “inflation continues to be an area of concern” and that the government is looking at all short, medium and long term measures, and have also set up a committee to reign in the rising prices.
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