The country’s economy is expected to grow by around 6 per cent in the current fiscal, even in the worst-case scenario of global recession prevailing till March 2010, according to Arvind Virmani, chief economic adviser in the Ministry of Finance.
The growth projection matches with the Reserve Bank of India’s (RBI) estimate of 6 per cent expansion in Gross Domestic Product (GDP) in 2009-10. But it is higher than the median forecast of 5.7 per cent by professional forecasters, according to a survey done by the central bank.
“The worst-case scenario assumes that the global economy would be still in recession till March 2010. Even in that scenario, I expect the Indian economy to grow by 6 per cent, plus or minus 0.5 per cent,” Virmani told Business Standard.
However, in the best-case scenario of the global economy recovering after September 2009, he predicts the growth rate of around 7 per cent in 2009-10.
In this case, the growth rate in the current fiscal would be similar to the previous one that ended in March 2008, where growth was bouyant in the first half before the global economic crisis put a spanner on expansion. “The implication (of best case scenario) is that the growth as a whole may average out to be the same as the previous year,” he added.
Both the World Bank and International Monetary Fund have predicted the world economy to contract by 0.5 to 1.7 per cent for the first time in 60 years. India’s growth, according to the two global institutions, is also expected to fall below the 5 per cent mark.
Virmani, however, did not give up the sector-wise break-up of growth except to say that agricultural output, which has nearly 18 per cent weight in GDP, would post a normal growth rate of 2.5-3 per cent.
The government, along with the RBI, had implemented series of measures aimed at boosting economic demand. In particular, excise duty on most products has been reduced by 6 percentage points. The central bank too has reduced repo rates — the rate at which it lends to commercial banks — by 4.25 percentage points since September 2008. These measures are expected to cushion the impact of economic slowdown at a time when private investment, which drove economic growth, has slumped because of uncertainty.