FM to project 13-14% nominal growth

RUN UP TO THE BUDGET 2004-05

Inflation target may be set at 5.5%.

Finance Minister P Chidambaram is set to project a 13-14 per cent nominal growth in the economy during the current fiscal.

The implicit inflation target assumed by the ministry for 2004-05 was 5.5 per cent with an upward bias, government sources said.

The sources said the current rate of inflation at 5.9 per cent was not a cause for concern as it had not led to an increase in the prices of mass consumption items.

The current inflation rate was expected since global commodity prices had been firming up over the last 12 months, the sources said.

"Politically, its not a problem now," a source said, adding that a slightly higher inflation actually boosted gross national income and hence had a healthy effect on the government's books.

"This gives the government some leeway in managing the fiscal deficit. It also adds to tax buoyancy," the source said.

When asked if the economy would be able to sustain the high growth rate of 8.2 per cent in 2003-04, the sources said 7 per cent real GDP growth was achievable with the meteorological department projecting a good monsoon.

Meanwhile, at a recent meeting with senior Planning Commission officials, Chidambaram said containing the fiscal deficit around the Interim Budget estimate was the bottomline.

So, even as the Plan panel sought a Rs 24,000 crore increase in the gross budgetary support (GBS), sources said the ministry was likely to raise it only marginally.

The sources further said both the prime minister and the finance minister were keen to assure multilateral agencies and foreign investors that the common minimum programme did not necessarily mean huge spending and a high fiscal deficit.

"The deficit will be under control," the source said.