Indian economic growth forecast slashed: Mid-Year Economic Analysis

Dec 17 2012, 19:32 IST
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India lowers its official economic growth forecast to between 5.7 and 5.9% for this fiscal year. (Reuters) India lowers its official economic growth forecast to between 5.7 and 5.9% for this fiscal year. (Reuters)
SummaryIndia lowers its official economic growth forecast to between 5.7% and 5.9%.

numbers, corporate profitability and moderating inflation.

The document said that achieving Budget targets in case of corporate tax, customs and central excise would be "somewhat difficult given the trend so far".

Rajan said low corporate profitability is impacting revenue realisation. "We hope it will start picking up once again and that should add buoyancy (to tax revenue)" he said.

The government, he said, will have to find ways to boost growth to improve corporate profitability and tax collection.

Rajan said that corporate performance will also improve with RBI reducing interest rates, which could be seen as one of the factors affecting growth.

Expressing concern over high current account deficit (CAD), the document said the government should endeavour to reduce it by improving the exports and trade balance.

It said that the CAD and trade deficit would be lower than the last fiscal. In 2011-12 fiscal, CAD was 4.2 per cent.

"We are worried about CAD. We want to take steps to monitor it," Rajan said, adding that gold imports are declining and there is a need for coming out with financial instruments which will attract investors so that they do not put money in gold, which is an unproductive asset.

Food inflation was more of a structural problem and its response to monetary policy changes is relatively weak, the Mid-Year Review said, adding that the momentum of food inflation is pointing towards moderation.

It said the recent decision of the government to open multi-brand retail to foreign investment would help consumers and farmers by improving the logistical facility.

The document said agriculture is expected to improve because of better prospects with rabi crops and dominance of irrigated wheat and rice crops.

Also, it added that services sector is expected to do better, driven by the performance of real sectors.

It said the fiscal deficit roadmap announced by Finance Minister has considerably improved business expectations and perception of the domestic and global investors.

As per the roadmap unveiled by the Finance Minister, the fiscal deficit has to be brought down to 3 per cent of the GDP by 2016-17.


Following are the highlights of the Mid-Year Economic Analysis 2012-13 tabled in Parliament today:

* Economy expected to grow at 5.7-5-9 pc in 2012-13.

* GDP growth in H2 seen at 6 pc against 5.4 in first half.

* Slowdown seems to have bottomed out.

* Global economic climate continues to be fragile.

* Monetary and fiscal policies should be supportive to boost investor confidence.

* Recent fiscal consolidation plan has

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