New Delhi: The Indian economy may expand between 6.5% and 7% in the year to March 2010, as stimulus measures are expected to revive growth, a member of Planning Commission said on Wednesday.
Abhijit Sen, however, said there was need for more fiscal and monetary steps to maintain growth momentum in Asia’s third largest economy hit by global slump and sluggish domestic demand.
“We have done a worst-case calculation on the basis of no effect of the stimulus and what we know currently about the world economy. On that basis, the worst case scenario is about 5% growth,” he said after a business conference.
But the stimulus packages already announced were expected to ratchet up growth rate by 1.5 to 2 percentage points over and above the minimum assessment, he said.
“That would take the growth rate to 6.5 to 7%.”
Earlier, the government estimated 2008/09 growth at 7.1%, but analysts have raised doubts after December quarter data showed a lower-than-expected 5.3% expansion and the global economic situation worsened.
A Reuters poll showed India’s growth rate could moderate to 7-year low of 5.7% in 2009-10.
MORE STIMULUS NEEDED
Since October, the central bank has cut interest rates by 400 basis points, while the government slashed excise duty and service tax rates and pledged extra spending of Rs200 billion to protect growth and jobs.
“There may well be need for more fiscal stimulus,” and fresh measures would have to be framed by the next government, Sen said.
After election dates are announced, a care-taker government is barred from taking any new policy initiative.
India is heading for general elections scheduled between 16 April and 13 May, and any new fiscal measure has to be announced by the new government when it assumes office and presents a full budget for the 2009-10 fiscal year.
“I believe, although monetary policy have to continue till the next government comes, much will depend on what the next government does on the fiscal side,” Sen added.