Economy is likely to grow by close to 6 per cent this financial year on manufacturing picking up in January-March period as a result of recent government decisions, PMEAC Chairman C Rangarajan said here today.
On projections for the next financial year, he said: "I expect 2013-14 to be better than 2012-13 for several reasons, plus the change in investment sentiment. The full impact (of recent government decisions) will only be seen in the course of next year which can result in private investment activities picking up."
Rangarajan was speaking at the Chamber Day celebrations of Hindustan Chamber of Commerce.
"We really need to see that manufacturing sector needs to pick up and I believe that actions and decisions taken by the government recently have started showing a change in investment sentiment. Therefore, in the (current) three months – January, February and March – I believe manufacturing will pick up and we will get a growth rate close to 6 per cent this year," he said.
According index of industrial production (IIP) data, manufacturing sector grew just 0.3 per cent in November 2012. The output of the key sector remained low at one per cent in April-November last year as against 4.2 per cent growth in the same period of the previous year.
Rangarajan's forecast on growth follows Reserve Bank trimming its projection for the current fiscal to 5.5 per cent from 5.8 per cent estimated earlier in the monetary policy review on January 29.
On the current account deficit, the chief of Prime Minister's Economic Advisory Council (PMEAC) told reporters that CAD should remain more or less of same level of last year level due to high import of gold, coal and oil.
"It should be around this figure. Somewhere around 5 per cent or may be slightly higher. The fact is that Indian economy is growing at fast rate, and the other economy are growing at lower rate. Therefore, our exports ... are affected because of their lower growth.
Whereas our imports are higher, because we are growing at a higher rate. It is this itself, is causing a certain imbalance in the system," he said.
Current account deficit, measured by the difference between country's exports of goods, services and transfers to total import within a time period, was 4.2 per cent in 2011-12. It touched a record high of 5.4 per cent in the July-September quarter (Q2) this fiscal.
"There is also a focused attention on the part of the government to achieve the production and capacity utilisation targets in some of the key infrastructure sectors such as coal, power, roads and Railways.
"And this in my view will act as a stimulant for private economic activity and will result with the growth rate of economy picking up and expect growth rate next year to be seven percent," Rangarajan said.
On gold imports, he said India imported USD 60 billion of the metal in 2011-12.
"If you look at the average in the previous years, it used to high. It was around USD 35-40 billion. But last year it was USD 60 billion. Why this extraordinary increase? There are many reasons for it. One is, attraction towards the yellow metal. And of course, to some extent gold is becoming a hedge against inflation," he said.
Gold imports, as of numbers available up to October and November last year, have softened, he said.
"We have also taken some action in order to discourage the import of gold. But as we move ahead, we need to contain the balance of payments deficit," he said.
Besides gold, he said imports of coal and oil remained high, too.
"The other imports are also high. Coal imports are also high. When the domestic production was not picking up, it was substituted by imports of coal. And the other, oil import remains very high. One had expected that because of the slowdown in the economy of advanced countries, there would be some decline in oil prices, but it did not happen", he said.
Observing that the monsoon behaved better in August and September, he said agriculture production may not be affected as severe as expected this year.