With global credit rating agencies cutting the growth forecast for India, the Planning Commission may also revise downwards the projected growth rate for the 12th Plan period.
A decision to this effect is likely to be taken at a meeting next month of the full Planning Commission, led by the Prime Minister.
The revision may cut the projected growth by one percentage point over the five-year period.
Approach paper
The Approach Paper for the 12th Plan talks about two growth scenarios, one envisaging nine per cent growth and the other 9.5 per cent growth a year. Now the expectation is that these may be brought down to eight per cent and 8.5 per cent.
This development comes at a time when foreign institutions such as Citi Group, CLSA, Goldman Sachs and Moody’s along with domestic institutions like Crisil have revised the growth outlook downwards for the current fiscal year. The current fiscal year – 2012-13 – is the first year of 12 Five-Year Plan.
Trouble ahead
A senior Government official told Business Line , “The Euro crisis is creating problems. Now the drought-like situation in some States may add more trouble. Industry is yet to revive. So, downward revision in the overall growth scenario will be highly desirable.”
The Deputy Chairman of the Planning Commission has already indicated a downward revision. On July 6, he had said that “it is not possible to think of an average of nine per cent (in 12th Plan)…somewhere between eight and 8.5 per cent is feasible.”
Meanwhile, the official said that since the approach paper has already been approved by the National Development Council (the highest level Centre-States Co-ordination body), the full Planning Commission meeting can first take a view on any change.
After approval by the NDC and the Cabinet, change can be incorporated in the Plan document. The NDC is expected to meet in October.
Growth forecast
Moody’s cut down the projected growth rate to 5.5 per cent for current fiscal. Prior to that, Citi group revised the growth rate to 5.4 per cent while for CLSA it was 5.5 per cent. From the domestic side, RBI lowered the growth projection to 6.5 per cent from 7.3 per cent.
This was followed by Crisil, which joined the bandwagon of foreign institutions with a revised growth estimate of 5.5 per cent.
Shishir.sinha@thehindu.co.in