Markets & manufacturing to take growth to 5.7-5.9%

Dec 18 2012, 00:27 IST
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SummaryListing out a host of positives including “a visible buoyancy in the capital markets” and “the resurgence of growth in manufacturing sector,” the government on Monday exuded confidence that “moderate acceleration” in the rate of GDP expansion in the second half would take growth in 2012-13 to 5.7-5.9%.

increase in the growth of government consumption expenditure to 8.8% in H1 this year (6%).

The finance ministry said most services – particularly the trade, transport, communication and financial services being largely driven by the performance of real sectors – will also log better growth this year. It added a better rabi crop to offset the decline in agriculture production in kharif, but analysts point out that rabi output will be reflected in the GDP of first quarter of next fiscal.

Echoing the views expressed by Chidambaram last week, Rajan said the economy was already witnessing some “green shoots” and that going forward, growth would pick up on the back of increasing corporate profits. He acknowledged that combating fiscal deficit and paring current account deficit are big challenges for the government.

On fiscal consolidation, the report said a road map announced by the government on October 29, 2012, has considerably improved business expectations and perception of domestic and global investors, the report said.

The finance ministry expects inflation to moderate to 6.8-7.0% by March from 7.24% in November. “A further moderation in inflation, likely to commence from the fourth quarter of the current year, together with benign global commodity prices, will also facilitate softening of the monetary policy stance of RBI,” the report said, ahead of the RBI policy review on Tuesday.

Rajan acknowledged the government was worried about the large current account deficit (CAD), with exports having slowed down and imports being less elastic. CAD widened to 4.2% of GDP in 2011-12, up from 2.7% in 2010-11. The cumulative value of exports for the April-November 2012-13 period was $189.2 billion as against $201.18 billion, registering a 5.95% decline. The ministry said the diesel price hike has helped curb the CAD and asked for gold-based financial products to cut imports.

“However, given the present indications, it is expected that the trade deficit in the current year would not be significantly higher than what it was last year. Consequently, it is reasonable to expect that the current account deficit as a ratio of GDP would be lower than what it was in 2011-12,” the report said. The CAD is projected at 3.7% this fiscal.

Rajan said disinvestment has gathered pace with the successful NMDC share sale which raised Rs 5,980 crore. The government has so far raised Rs 6,914 crore through share sales in NMDC, Hindustan Copper and NBCC. Rajan also pointed to the importance of improving

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