Mumbai: Planning commission deputy chairman Montek Singh Ahluwalia on Friday forecast moderate economic growth of 6.5-7% for fiscal 2013, though chief economic advisor Kaushik Basu reiterated his more optimistic prediction of a 7.6% increase for the year.
“I won’t be surprised if we don’t achieve 7.5% growth (for fiscal 2013) but somewhere between 6.5-7% is quite possible... in a slowdown you should be realistic,” Ahluwalia said, speaking on the sidelines of a financial inclusion conference organized by the Skoch Foundation.
Economic growth slowed to a nine-year low of 5.3% in the three months ended March, forcing economists to cut their growth forecasts for fiscal 2013. Earlier this week, US-based investment bank Morgan Stanley scaled down its fiscal 2013 growth estimate for India to 5.8% from 6.3%.
Sounding realistic: Planning commission deputy chairman Montek Singh Ahluwalia. Photo: Priyanka Parashar/Mint
Government data released last week showed that growth for 2011-12 could slip to 6.5% based on the dismal numbers in the final quarter. Economists have blamed policy inaction from the government for the domestic slowdown, such as its failure to pass on higher fuel prices to consumers.
Ahluwalia said India cannot grow rapidly if fuel prices are not aligned to global prices.
“We have to do a lot to change the hesitation of the global investors... It is quite clear that growth has decelerated and it has decelerated more than we thought,” Ahluwalia said.
India needs to bite the bullet on fuel prices because the subsidy burden works as a drag on the economy, he said.
In a separate event in Mumbai, Basu called for interest rate cuts by the Reserve Bank of India to pull up growth.
“Given that growth is moving so poorly and inflation is slowing down, some easing of interest rates in the form of repo will be worthwhile at this juncture. Our focus should be entirely on growth and our hope is that inflation will ease below 7% and it is moving in that direction,” Basu said.
“It is time when the RBI should think about infusing liquidity into the system. I will argue that there are reasons to believe that there will be a turnaround (from the slowdown in the economy),” Basu said, adding, “Given the current indication (of a possible global revival), I am optimistic GDP growth will be around 7.6% in the current fiscal.”
Ahluwalia, too, said he expects a turnaround in growth in the coming quarters.
Basu admitted that long-pending legislation like allowing foreign direct investment in multi-brand retail and partially decontrolling diesel prices will help growth, and said the government is making efforts to ensure that borrowing for the current fiscal year is under check.
RBI will announce its mid-quarter monetary policy on 18 June. In April, the central bank cut its benchmark repo rate by a sharper-than-expected 50 basis points, bringing the repo rate down to 8%.
Anup Roy contributed to this story.