A growth rate of 7.5 per cent in gross domestic product (GDP) in the current financial year depends on the monsoon and the international economic situation, said C Rangarajan, chairman, Prime Minister’s economic Advisory Council.
“The downside risks are two or three (for maintaining the 7.5 per cent GDP growth). One is the behaviour of the monsoon. This is predicated on the assumption that the monsoon will be normal and therefore the agricultural production will also be reasonable,” Rangarajan said here on Monday.
“The second is the international situation. It is expected that the international situation will remain more or less in the same way it existed in the last few months. So, unless there is a sharp deterioration in the global economy, we should be able to maintain the 7.5 per cent rate of growth,” he added.
Without giving any direct reply on the recent Supreme Court order cancelling 126 licences of 2G spectrum that is likely to impacting foreign direct investments (FDI), Rangarajan said if the country continued to maintain the rate of growth at 7.5 or 8 per cent for the next several years, there might not be any decline in FDI.
“FDI is largely influenced by the expectations of the investors regarding the future of the economy. I think the growth of the economy will be a major factor influencing investment decisions,” he said.
Inflation still high
Replying to a query, he said though the non-food, manufacturing inflation had shown a definite sign of decline, food inflation was once again on the rise, forcing the overall inflation to still remain at a higher level.
“In fact, vegetable prices seem to be again on the rise. Or, when we talk about food inflation, it includes not only cereals but also commodities like milk and vegetables,” Rangarajan said.
Diesel price hike
Rangarajan said diesel price hike should be done in phased manner. “I think we really need to make some changes with respect to diesel prices. It may not be possible to do it at one go. Therefore, we need to do it in phases,” he said.
On the issues relating to de-regulation of the sugar sector, Rangarajan said besides the minimum support price, the idea was to share with farmers an additional remuneration in the form of profits.
“The committee (on sugar decontrol headed by Rangarajan) has been appointed just a month ago. At this moment it is an idea, which has been practiced in some other countries. We are thinking on how to implement it. It may take another five months or so,” he added.
