Economy to grow at 5 to 5.5% in 2013-14: Chidambaram

Measures taken by the government will yield results and help India achieve potential growth rate of 8 percent he said.

PTI| Last Updated: Nov 15, 2013, 19:37 PM IST

Mumbai: With the greenshoots of recovery visible, Finance Minister P Chidambaram Friday exuded confidence that the economy will pick up in the second half and record a growth of 5-5.5 percent in 2013-14.

He, however, sounded a note of caution for investigative authorities, saying all commercial decisions should not be seen as "motivated or malicious."

"I am confident that the greenshoots that are visible here and there will multiply and that the economy will revive. There will be an upturn in the second half of this year," Chidambaram said in an address to bankers at Bancon 2013.

"It's quite possible that the estimates made by the Reserve Bank or the Prime Minister's Economic Advisory Council or the government about growth being between 5 and 5.5 percent will be realised," he said.

GDP growth fell to a decade-low of 5 percent in 2012-13 as investments slowed and factory output decelerated. In the April-June quarter, the growth rate was 4.4 percent.

Chidambaram said the government will be able to contain the fiscal deficit at 4.8 percent of GDP and narrow the current account deficit (CAD) to less than USD 56 billion, though inflation continues to be worrisome.

Chidambaram asked the bankers to deal firmly with wilful defaulters and support those who are reeling under the impact of the economic slowdown.

"As far as government is concerned, I assure you as long as you take decisions based on facts and circumstances available to you at that time and do it at an appropriate level and an appropriate committee or an appropriate forum and exercise your best judgement, we will defend you and stand by you", he said.

India's exports grew 13.4 percent in October, the fastest pace in two years.

The eight core-sector industries expanded by 8 percent in September, the highest rate in 11 months. This pulled up the Index of Industrial Production for the month to 2 percent compared with 0.43 percent in August.

Chidambaram said it was a pity that a country of India's size could not achieve its potential growth rate of over 8 percent.

"Given that savings are above 30 percent of GDP and given the normal incremental capital-output ratio...The measures that we have taken will yield results and we will get back to the high-growth path. Movement towards the high-growth path will be visible in 2014," Chidambaram said.

He said inflation was "the most difficult challenge."

"We were able to contain WPI inflation for most part of this year until the recent spurt...We haven't been able to contain CPI-based inflation mainly because it is driven by food items, especially fruits, vegetables, eggs, meat and other items," he said.

While WPI-based inflation rose to an eight-month high of 7 percent in October, retail inflation was at a seven-month high of 10.09 percent.

The minister reiterated that the fiscal deficit target for the current financial year will be met. In 2012-13, the fiscal deficit was 4.9 percent of GDP.

"We will do whatever it takes to contain the fiscal deficit in the current fiscal to 4.8 percent of GDP. It is a red line, a red line which we can breach only at our peril. We will not breach that red line and we will contain the fiscal deficit," he said.

On the current account deficit (CAD), the minister said, "It was a minor miracle that we were able to finance it fully (in 2012-13) and even add small amounts to our reserves."

The CAD was at a record USD 88.2 billion, or 4.8 percent of GDP, in the previous financial year.