Indian economy may grow by 6.75 per cent during the current financial year despite the adverse impact of monsoon on farm sector output, the Prime Minister's Economic Advisory Council (PMEAC) said today.
"(It is) unlikely that growth will be lower than 6.25 per cent, but may reach 6.75 per cent", PMEAC said in its Economic Outlook for 2009-10 submitted to Prime Minister Manmohan Singh by its chairman C Rangarajan.
On an average, PMEAC said economic growth could be around 6.5 per cent.
India's economic growth slowed down to 6.7 per cent during 2008-09, from over 9 per cent recorded in the previous three years, on account of global financial meltdown.
The PMEAC further said inflation, which is hovering around one per cent, may firm up to 6 per cent by the end of the current fiscal. As regards farm sector, the report said agriculture output will shrink by two per cent on account of adverse impact of monsoon. Farm sector recorded a growth rate of 1.6 per cent in the previous fiscal.
Referring to the surge in food inflation, the PMEAC said there has been a 33 per cent rise in prices of primary food articles in the first half of the current fiscal, besides a "sharper rise in consumer price indices".
On the positive side, the PMEAC projected industrial recovery by pointing out that growth could jump to 8.2 per cent during the fiscal compared to dismal 3.9 per cent during 2008-09.
The growth rate of services sector, it added, may decelerate to 8.2 per cent from 9.7 per cent in the previous fiscal.
Pointing out that there are encouraging signs of capital flows, the PMEAC cautioned, "A further negative shock to the global financial system and global inflation could threaten growth in Indian economy".However, it said that the investment rate was likely to be 36.5 per cent of GDP, the same as recorded in the previous fiscal. It, however, may pick up with improvement in domestic conditions.
Savings rate, the PMEAC said, may inch up marginally to 34.5 per cent of GDP from 33.9 per cent during 2008-09.
