The finance ministry is planning to lower its growth forecast of 9 per cent for the current financial year. The downward revision may come in the wake of rising global commodity prices and high inflation.
“This year, because of changing global scenario and many other important organisations having downgraded India’s growth rate, we have decided that we would go back and take another look at our (GDP) numbers in mid-June,” Chief Economic Advisor Kaushik Basu told a press conference.
The mid-term review of the economy was due in October 2011, but the finance ministry has decided to review its projections next month itself due to the changing economic scenario.
Finance Minister Pranab Mukherjee has already said high inflation and any further rise in crude oil prices may pull down India’s economic growth to 8 per cent from a projected 9 per cent.
Wholesale price-based inflation fell to 8.66 per cent in April from the revised estimate of 9.04 per cent in the previous month, but economists cautioned that risks to inflation were rising from the demand side and fuel prices, which might even catapult it to double digits as the current financial year advanced.
The Reserve Bank of India (RBI), in its credit policy statement on May 3, reduced the growth estimates to 8 per cent, as it increased the policy rates for the ninth time in over a year. RBI decided to go for a sharper-than-expected 50-basis-point increase in policy rates to rein in inflation.
Basu said there would be some downward correction but declined to give a number. “My expectation is that it will be a small change,” he said.
Earlier this month, Economic Affairs Secretary R Gopalan had also indicated that the government’s finances could go awry if there was a bad monsoon and global crude prices continued to remain high. He said these two factors would play a key role in determining the fiscal deficit.
India’s GDP growth rate for 2010-11 is estimated at 8.6 per cent, while it was 8 per cent in 2009-10. The International Monetary Fund (IMF) has pegged the country’s economic growth at 8.2 per cent in 2011.
The average price for the Indian basket of crude oil this financial year stands at $110.55 per barrel, compared to $85.09 a barrel last financial year.
