Hopeful of a revival in economic activities, the government is likely to peg GDP growth for 2013-14 at 6.5 to 7 per cent, higher than the 5.7 to 5.9 growth in 2012-13 that the finance ministry has estimated in its Mid-Year Economic Analysis which was released last week.
“The impact of the ongoing European recession on India cannot be discounted. Also, despite our efforts, how far industry will be able to revive is yet to be seen,” said a senior government official, adding that 7 per cent growth next fiscal cannot be ruled out.
The finance ministry is understood to be using the estimate for its pre-Budget consultations, and though the final growth projection for next fiscal may be revised based on later data, sources said that it is unlikely to see a huge revision in the next few months to the run up to Budget 2012-13.
Along with the flurry of measures it has already unveiled, the government is also betting on an cut in lending rates by the Reserve Bank of India to help revive the industry, which is crucial for faster economic growth.
In October, the index for industrial production, jumped up to 8.2 per cent, although the cumulative growth in industrial activities between April and October, 2012 is at a mere 1.2 per cent.
Farm sector may also do better with expectations that the rabi crop production will improve. Agriculture grew by a mere 2.1 per cent in the first six months of the fiscal.
The government’s optimism on the improved economic scenario stems from expectations that growth has bottomed out in the first half of this fiscal when the economy expanded at 5.4 per cent.
This was also reflected in its Mid-Year Economic Analysis which said, “There are, however, reasons to believe that the slowdown has bottomed out and the economy is headed towards higher growth in the second half of 2012-13.”
However, a number of research agencies believe that though the economy will pick up in 2013-14, but are not betting on 7 per cent growth as of now. “Growth should accelerate to 6.3 per cent (in 2013) from 4.8 per cent this year (2012) due to favourable base effect, particularly in the industrial sector,” RBS Research said in a recent report.
Similarly, Goldman Sachs recently projected GDP growth at 6.5 per cent in 2013 and by 7.2 per cent in 2014, driven by