Montek sticks to 8.5% growth target for this fiscal

Montek sticks to 8.5% growth target for this fiscal

New Delhi: The Plan panel on Friday stuck to the projection of 8.5% economic growth this fiscal, even as top adivisor of the finance ministry has said that the target would be revised upwards because of robust 8.9% economic expansion in the second quarter.

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“The growth rate is very good. There will be base effect because growth began to pick up last year. I still say 8.5% is pretty good," Planning Commission deputy chairman Montek Singh Ahluwalia told reporters on the sidelines of a function to mark 5-year of Jawaharlal Nehru National Urban Renewal mission.

Ahluwalia’s remark is in contrast with chief economic advisor Kaushik Basu’s optimism that growth projections for this fiscal would be revised in the mid-term economic review, to be placed in Parliament next week.

“We had earlier given a projection of 8.5%. We will revise it. It is very very likely that it will be revised a little bit (upwards)," Basu had told reporters yesterday.

Basu’s comment came within days of the government data release showing that the country registered an economic growth of 8.9% during the July-September quarter.

The Government also revised the first quarter growth to 8.9% from 8.8%, taking the pace of economic expansion to 8.9% in the first half.

Indian economic growth had slowed down to 6.7% during 2008-09 due to the impact of global financial crisis from average of 8.7% in the previous five-year.

After the government provided stimulus, the economic growth accelerated to 7.4% during 2009-10.

The growth rate in the first half is quite tremendous, also because stimulus was partially withdrawn this fiscal.

On widening the current account deficit, Ahluwalia said, “We are watching the developments in CAD very carefully, it is true that this year CAD will be wider. But capital flows are adequate. So I don’t expect a problem."

He added, however, that the situation on CAD front should continue to be watched since these are uncertain times.

India’ current account deficit, representing net flow of income out of the country barring capital movements, surged three-fold to $13.7 billion in the April-June quarter from $4.5 billion a year ago.

This was due to higher imports because of economic recovery and larger payments overseas for certain services.

Because of increasing CAD, large foreign inflows -- particularly in the stock markets -- have not become a problem since part of the overseas money would be used to finance CAD.

Foreign institutional investors have pumped in around $39 billion in Indian capital markets so far this year. Besides, India has received $15.97 billion of FDI in the first half of this year. In addition, Indian companies have raised funds overseas.