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Prime Minister’s key economic adviser C Rangarajan on Thursday termed the International Monetary Fund (IMF) and the World Bank’s subdued economic growth projections for India as “unduly pessimistic”. India’s growth in FY14 would be 5.5 per cent, Rangarajan said.
“These institutions (IMF and World Bank) are unduly pessimistic. We think the growth rate will be between five per cent and 5.5 per cent. We had projected growth rate of five per cent earlier, which I think still holds,” said the Prime Minister's Economic Advisory Council (PMEAC) on the sidelines of the global conference on financial inclusion & payment systems.
Earlier this month, the World Bank had slashed India's economic growth forecast for FY14 to 4.7 per cent from an earlier projection of 5.7 per cent. The IMF in its World Economic Outlook projected the economy to grow by 4.25 per cent.
Last month, PMEAC had lowered the growth forecast for the current financial year to 5.3 per cent from the 6.4 per cent it had projected earlier.
According to Rangarajan, chairman of the PMEAC, agriculture will do extremely well. “The Monsoon has been extremely good. This will result in pick-up of rural demand.”
India's economy grew at a four-year low of 4.4 per cent in the first quarter of 2013-14, after GDP expansion fell to a decadal low of five per cent in 2012-13.
“As far as manufacturing is concerned, the second half will show a definite improvement. We will see the impact of measures introduced in the last five to six months. There will also be a strong pick-up in manufacturing in the second half. Therefore, we still stand by our earlier forecast. Indications are that exports are picking up in August and September. In August and September, the export growth rate was in double digits. That will also have an impact on domestic production,” he said.
On financial inclusion, Rangarajan said the government should look at the idea of local area bank. "While I had given the idea a few years ago, only a few such banks operate now. There is a need to re-look at the idea again."
According to him, banks are in the best position to lead financial inclusion. He said banks have benefited from the business correspondent model.
