New Delhi: The Indian economy should grow by at least 8.5% in the fiscal year ending March 2008, but annual inflation must be brought closer to 5%, the Prime Minister’s economic adviser said on Wednesday.
“The Reserve Bank’s estimate of 8.5% growth for 2007-08 appears alright,” C. Rangarajan, chairman of Prime Minister Manmohan Singh’s economic advisory council, told Reuters in an interview.
“While the global growth rate is expected to slowdown a little bit, nevertheless the overall global environment will be favourable for growth,” he said. “Therefore, one could think of a minimum growth of 8.5% for 2007-08.”
India has grown at an average 8.6% over the past four years, including the estimated growth for 2006-07. But policymakers are aiming for double-digit expansion to cut mass poverty and increase the country’s global economic clout.
Rangarajan, a former central bank governor, said the inflation rate, which hit a two-year high in January, was showing signs of coming down.
“But in the current year, or 2007-08, we should really bring it closer to 5% and if possible a little below 5%.”
He said steps taken by the central bank should moderate money supply, and over the medium term an inflation rate of around 4% was desirable.
Rangarajan said good monsoon rains and healthy government procurement of wheat and rice from farmers to build food stocks would help reduce inflationary pressure.
“If the procurement becomes better than last year and if the monsoon also behaves normally, then there is every possibility of the inflation rate coming down,” he said.