Plan panel sees GDP growth at 8.5%

The Planning Commission has projected that the economy of the country would grow to 8.5 per cent in the current fiscal. Along with its assessment of gross domestic product for the year, the commission feels the annual wholesale price index-based inflation will cool from the current 6 per cent-plus levels to 4-5 per cent later in the year. In 2006-07, inflation raged above the 5-5.5 per cent target of the Reserve Bank of India (RBI).

The country's economy is estimated to have grown 9.2 per cent in the last fiscal (April 1, 2006 to March 31, 2007). The Planning Commission has already said the first two years of the Eleventh Five-Year Plan would be vulnerable to a cyclical downturn, complicated by the effect of the oil prices and the lack of sufficient flexibility in fiscal management, arising from the Fiscal Responsibility Budget Management (FRBM) Act.

However, it expects the economy to gather steam and race ahead to achieve 10 per cent annual GDP growth in the terminal years of the Plan period.

The commission's assessment of 8.5 per cent GDP growth for 2007-08 is in sync with a similar forecast by the International Monetary Fund and credit rating agencies ICRA and Crisil, which have forecast a growth rate of 8.5-8.75 per cent and 7.9-8.4 per cent, respectively, for the current fiscal. The forecasts are better than the 8.3 per cent GDP growth projection by the Asian Development Bank (ADB).

The Plan panel also expects the central government to achieve the fiscal deficit target of 3.3 per cent of the GDP in 2007-08. However, it feels that the non-Plan expenditure will exceed the target by the end of the current year. Non-Plan expenditure for 2007-08 is estimated at Rs 4,35,421 crore, a 6.5 per cent increase over 2006-07.

In Budget 2007-08, Finance Minister P Chidambaram had announced that the government was on course to achieve the FRBM Act targets.

North Block has estimated total central government expenditure at Rs 6,80,521 crore (including Rs 40,000 crore for the State Bank of India share acquisition).

Total revenue receipts of the Centre are projected at Rs 4,86,422 crore and revenue expenditure at Rs 5,57,900 crore. Consequently, the revenue deficit is estimated at Rs 71,478 crore or 1.5 per cent of the GDP. The fiscal deficit is estimated at Rs 1,50,948 crore or 3.3 per cent of the GDP.