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Planning Commission Deputy Chairman Montek Singh Ahluwalia on Tuesday termed the current financial year as ‘unusual’ for world economies, and said the growth rate for India would be around eight per cent.
“The current year is a very unusual year for the world economy and the Euro zone crisis has made virtually every country revise its growth rates downwards. This year, at the Planning Commission, we expect the growth rate to be around eight per cent. We are not expecting nine per cent in the year 2011-12,” he said.
Ahluwalia had earlier projected the growth rate for the current year at 8.2 to 8.5 per cent. Chief Economic Advisor in the finance ministry, Kaushik Basu, had yesterday said the growth rate for this financial year would be 7.5 per cent to eight per cent, after taking note of the ongoing global economic slowdown.
Speaking to reporters after delivering an address at the Vignana Jyothi Institute of Management here, Ahluwalia said one should not unduly be depressed by short-term problems.
“From the 12th Five-Year Plan, beginning April 2012, we see an average growth rate of nine per cent,” he added. Replying to a query on inflation, he said inflation, on a year-on-year basis, was high and the International Monetary Fund (IMF) had downgraded the growth prospects of all regions.
Portraying a gloomy outlook for the global economy, the IMF, in its latest report, said the global economy was in a dangerous phase, as business activity had weakened and confidence had fallen sharply. Global growth would moderate to about four per cent through 2012, from over five per cent in 2010, the IMF has said in the World Economic Outlook Report.
“The difference is, while other countries are growing at one or 1.5 per cent, for us slowing down means eight per cent. Some people say it could be less than eight per cent. They also think it will be somewhere on the higher side of seven per cent. I do expect we will be able to reverse that from next year. I think the global economy will get back into a more normal position,” Ahluwalia said.
“Our expectation is that it (inflationary pressures) will come down significantly by the end of March 2012. Not even next month, I see some softening from this November,” he added. On whether the increase in interest rates by the Reserve Bank of India (RBI) would ease inflation, he said the last increase had not yet had any impact on inflation and hinted that lowering of interest rates was not expected at this juncture.
Concerned over high inflation, RBI recently raised key interest rates by 25 basis points, its 12th such increase since March 2010. Following the increase, the short-term lending (repo) rate stands at 8.25 per cent and the short-term borrowing rate (reverse repo) is 7.25 per cent. The central bank is scheduled to unveil the second quarter monetary policy on October 25.
On agricultural production, Ahluwalia said the current year had a very good monsoon, one per cent higher than normal. “Our assessment is, while agri growth was a little over two per cent in the 10th Plan, it will be 2.5 per cent in the 11th. This year, the performance of agriculture has also improved. We want to achieve four per cent growth and hopefully we will be able to do that in the 12th Plan,” he said.