FinMin to lower GDP projection in mid-year economic review
New Delhi: Finance Ministry is likely to lower economic growth projection for the current fiscal to 5.7-6 percent 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 said.
In the budget for 2012-13, the then finance minister Pranab Mukherjee had projected the economy to grow by 7.6 (+/- 0.25) percent.
The growth projection for 2012-13 was optimistic and would have to 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 percent".
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 percent, from 6.5 percent 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 percent 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 percent in 2011-12.
The mid-year review will also revise the fiscal deficit target, which in the budget was pegged at 5.1 percent 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 percent, though some experts like the global rating agencies are of the view that it could be as high as 6.1 percent.
The review will also focus on improving the Current Account Deficit (CAD) situation. Chidambaram has already said that it could improve to 3.5 percent of the GDP in the current fiscal, from 4.2 percent 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 percent, from 7 percent 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.