FM says growth prospects better, warns against Europe crisis

The government today attributed higher economic growth projected in the mid-year economic analysis for this fiscal than the Economic Survey to robust economic expansion in the first half.

It, however, cautioned against the impact of fragile European recovery on Indian economy. Finance Minister Pranab Mukherjee told reporters that a sizable percentage of Indian exports are destined towards Europe.

"Therefore, the recovery-rather rapid and robust recovery- of Europe is important from India's point of view," he said. The analysis, tabled in Parliament today, projected economic growth in the range of 8.75 per cent plus or minus 0.35 per cent.

This is against 8.5 per cent plus or minus 0.25 per cent projected in Economic Survey, brought out in February this year.

"Our assessment... CSO has already projected in first two quarters... Growth is 9 per cent. It was originally 8.9 in both terms and now first quarter has been revised from 8.8 to 8.9.

"Second quarter is 8.9... That is also quite encouraging," Mukherjee said while speaking on the projections of the mid-year analysis. Mukherjee attributed the range of economic growth in the analysis to fragile economic recovery in Europe.

"One of the reasons is there have been certain uncertainties like recovery of Euro.

"And Europe has relevance from viewpoint of FDI, investment and also from external trade, particularly export," Mukherjee said.

He said a sizable percentage of Indian export are destined towards Europe. "Therefore, the recovery-rather rapid and robust recovery of Europe is important from India's point of view," the Finance Minister said.

After sovereign debt crisis in countries like Greece, Portugal and Spain, Europe has been hit by a financial mess in Ireland.

On inflation, the Finance Minister said though falling, it should decline further.

"Inflation is coming down. Now it is at the single digit but I would like it to be further reduced. I am hoping that by March it would be around 6 per cent, but it should come down further," he said.

The analysis said inflation has started coming down and is placed at 8.6 per cent in October as compared to 11 per cent in April.

The Finance Minister said the report has been rechristened Mid-Year Economic Analysis from Mid-Year Economic Review as the new name has wider connotation. 

"Earlier, the term was review but this time we have chosen the term analysis as it gives us a broader space," he said.