The finance ministry is likely to table its mid-year economic review in Parliament on December 9, with the theme that the economy’s expansion moderated in the first half of this financial year, but is still doing better than most countries of the world.
The review might peg gross domestic product (GDP) growth at around 7.5 per cent in 2011-12, the lowest in three years.The Budget had assumed the economy would grow by nine per cent this year. However, this growth rate would not be as low as in the global financial crisis period of 2008-09, of 6.8 per cent.
“Finance minister Pranab Mukherjee has already said the economy is expected to expand at 7.5 per cent in the current financial year. The mid-year review will also lower the growth forecast and keep it around the level indicated by the finance minister,” a ministry official told Business Standard.
In the first six months of 2011-12, the economy grew by just 7.3 per cent on account of a slower expansion of 6.9 per cent in the second quarter (July-September). While industry is expecting a further slowing in the second half, the ministry is hopeful of slightly better growth during the rest of the year.
The review, done by chief economic advisor Kaushik Basu’s team, is likely to be on the lines of last year’s mid-year analysis in terms of design and format. It will analyse the state of the economy and take stock of different sectors in the first half of the year.
“It will highlight that we are doing better than the rest of the world. There will be an analysis on how we are doing on the fiscal deficit front,” said the official.
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As part of its fiscal consolidation exercise, after giving a stimulus to the economy after the 2008 crisis, the government had projected the fiscal deficit at 4.6 per cent of GDP in the current financial year. In the first seven months of the current financial year, however, the deficit had cumulated to 74 per cent of the Budgeted total for the year. In the first half, it had reached 6.7 per cent of GDP.
Global ratings agency Moody’s has said it may revise downwards India’s growth forecast for 2011-12 to 6.5 per cent from the seven per cent projected earlier, as the country might have tough times ahead.
The Reserve Bank of India has been increasing policy rates to tame persistently high inflation, but the move has affected growth. In its October 25 mid-quarter review of monetary policy, the central bank hinted it might take a pause, after increasing key policy rates 13 times since March 2010.
India’s second quarter GDP growth of 6.9 per cent is second only to China, which grew at 9.1 per cent. All other large economies grew dismally. The US and the UK saw their July-September growth slowing to 1.6 per cent and 0.5 per cent, respectively. Germany and France grew by just 2.5 per cent and 1.5 per cent, respectively.