The Financial Stability and Development Council (FSDC) said the growth momentum in the economy will be maintained, despite a steep 50 basis point hike in repo (short-term lending) rate by the Reserve Bank of India.
“We are confident that growth trend will continue,” insurance regulator J Hari Narayan told reporters, after a meeting of the FSDC, chaired by Finance Minister Pranab Mukherjee.
An official statement issued after the meeting, however, said a general consensus emerged that while inflation may not be conducive to short-term economic growth, India’s medium long-term economic growth prospects remain bright. In the short-term, it is necessary to tackle inflation.
Hari Narayan said: “The major concerns were the relationship between inflation and growth.” The finance minister had said notwithstanding slowdown in industrial growth and moderation in the expansion of the interest-sensitive sectors, the overall momentum in GDP growth for this fiscal is in line with the momentum attained in 2010-11.
In other words, Mukherjee’s expects the economic growth to be close to 8.5 per cent recorded last fiscal. This is, however, higher than RBI’s projection of eight per cent growth for the fiscal. Ficci Secretary General Rajiv Kumar said even RBI’s projected growth rate of eight per cent does not seem feasible, after the central bank’s move on the policy rates front.
The FSDC said provisional tax collection figures for the first quarter of the current fiscal were encouraging and it might help meet the growth and fiscal deficit targets.
RBI, in its monetary review, had said that subsidy figures will overshoot the budget numbers, despite the fuel price rise and duty cuts on petroleum products, and will affect fiscal and revenue deficits.
The government’s net indirect tax receipts recorded a 32 per cent increase to Rs 76,499 crore, while gross direct tax collections rose about 23 per cent to Rs 1,03,000 crore in the first quarter. Net direct tax receipts, however, showed a 17 per cent dip to Rs 57,000 crore following a 200 per cent rise in tax refunds.
