Admitting that the situation has not changed much during the past one year, Finance Minister Pranab Mukherjee today said that he will have to address the slippages in economic parameters in the upcoming Budget.
"I must confess, at this point in the year, I find myself in much the same situation," he said 84th annual general meeting of Ficci here. As I set about preparing the Union Budget for the next year, I have to take stock of the developments in the past months and find ways to address the slippages, the gaps and building on outcomes that need to be consolidated in the ensuing years," he said.
Warning that the months ahead are difficult, he said the growth rate could fall below 7.5% in the current financial year from 8.5% a year ago.
"We have difficult last quarter ahead of us in this fiscal year. Our growth for 2011-12 may be around 7.5% or less," he said. There are also concerns on the central government finances for the current fiscal, he said, adding, performance during the first half on the fiscal front poses some risks in both receipts as well as expenditure estimates.
"Adhering to the fiscal deficit target of 4.6% of GDP in 2011-12 is a major challenge," he said. The government proposes to bring down the fiscal deficit in the current fiscal to 4.6% of the GDP from 4.7% a year ago. However, the surge in subsidy bill and poor realisation from disinvestment has made the task difficult.
According to official estimates, the subsidy bill of the government is likely to exceed Budget projections by about Rs 1 lakh crore during 2011-12. As far as disinvestment is concerned, the government has been able to mop up just around Rs 1,100 crore, against a target of Rs 40,000 crore.
Claiming that India's growth fundamentals are strong, Mukherjee said they look more attractive in a world challenged by problems of confidence and lack of growth.
"India's robust performance in difficult times shows that we could actually come out stronger from the crisis," he said. There are some clear signs of inflation moderating in the coming months, he said, adding, "I expect it to be in the range of 6-7% in end-March, 2012."
Industrial production is also showing signs of a pick-up. While the services sector has retained its growth momentum, agriculture sector expansion despite high base year production is likely to provide a buffer for the moderation in growth rate in the current fiscal year, he added. He, however, said, "We have to be alert to shape the required policy responses, reform systems, improve the regulatory framework of our institutions to make the most of the opportunities coming our ways."
There have been a host of policy measures, including incremental changes in easing capital controls, making available a framework for pooling of debt finances for infrastructure and various other measures which lend credence to the commitment to economic reforms, he added.
Acknowledging that the process of reforms sometimes gets events, the Finance Minister said, "This is in the very nature of our democracy and its polity."
For this process of reform to be sped up, Mukherjee said, "Indian enterprise has to help build the consensus across our diverse social and political space to benefit from the opportunities before us."
The industry has to demonstrate its willingness to marry its economic interests with some larger social responsibilities, he said. Attributing the rupee depreciation to global factors, he said the pressure on the domestic currency was likely to continue until some solution is found to the sovereign debt problem of Eurozone countries.
"We have seen the rupee depreciating vis-a-vis the dollar in the current fiscal year, most of it has been since August, 2011. This has come in the way of the economy benefiting from softening in international commodity prices, including that of fuel oils and hence, better management of domestic inflation," he said.
Rupee depreciation, he added, was largely driven by global factors and "the pressure would continue until there is a durable solution to sovereign debt problem in the Eurozone."
The Indian currency has depreciated by about 15% against the US dollar in the current financial year.
