Amid slowdown in interest rate sensitive sectors, the finance ministry on Monday said it had not taken a call on scaling down economic growth for this financial year from the projected nine per cent in the Economic Survey.
Earlier, Chief Economic Advisor Kaushik Basu had said that the ministry is planning to revise down its forecast of economic expansion for 2011-12 in the wake of rising global commodity prices and high inflation.
“This year, because of changing global scenario and many important organisations having downgraded India’s growth rate, we have decided we will go back and take another look at our (GDP) numbers,” Basu had said.
The Economic Survey for 2010-11 pegged economic growth in the range of 9 per cent (plus, minus 0.25 per cent) for this financial year.
Usually, the finance ministry takes stock of its projections on economic growth in the mid-term review of the economy that would be due sometime in October 2011. However, due to the changing economic scenario, the finance ministry had decided to review its projections earlier itself.
Pranab had already said high inflation and any further rise in crude oil prices might pull down India’s economic growth in 2011-12 from the projected 9 per cent.
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Last week in Washington, he had said the economy was likely to maintain the growth momentum of the previous financial year in 2011-12 as well. In 2010-11, the economy grew 8.5 per cent.
Wholesale price based inflation rose to 9.06 per cent in May as compared to 8.66 per cent in the previous month. The rate of price rise for the month of June would be released next month and would factor price rise in petroleum products.
As concerns arose on successive rates rise by the Reserve Bank of India (RBI) to tame inflation on economic growth, the central bank has stated there is no indication of a broad slowdown in the economy, though certain interest rate sensitive sectors like auto has shown deceleration in growth.
RBI had also said pricing power remained intact with corporate despite rising input costs. The central bank pegged economic growth to 8 per cent this financial year, while the World Bank projected it to grow 8.2 per cent. Global rating agency Fitch also scaled down projections for India’s economic growth rate to 7.7 per cent for 2011 from 8.3 per cent.
The economic growth fell below the psychological mark of 7.8 per cent in the fourth quarter of 2010-11. Even though the economy had registered 8.9 per cent growth in the first two quarters and 8.2 per cent in the third quarter, the lower growth on account of slowdown in manufacturing pulled down the full year’s growth to 8.5 per cent, a notch lower than the projected growth rate of 8.6 per cent for the year.