Economy has bottomed out, to grow 6.4% in FY14: PM’s council

The Indian economy is expected to grow at 6.4 per cent in 2013-14, the Prime Minister's Economic Advisory Council has estimated.

This is much higher than GDP growth estimate of 5 per cent for 2012-13 put out by the Central Statistics Office.

Addressing a press conference to release a report on

Review of the Economy 2012-13 , the Council Chairman, C. Rangarajan, said that the farm sector is likely to improve and is projected to grow at 3.5 per cent in 2013-14 while the manufacturing sector is projected to grow at 4 per cent and services at 7.7 per cent.

"The economy has bottomed out and the possibility of achieving 7 per cent growth is there,” he added.

Inflation

The PMEAC estimates that headline WPI inflation is expected to be around 6 per cent in 2013-14 with primary food inflation around at 8 per cent, fuel inflation at about 11 per cent and manufactured goods at around 4 per cent. The provisional figure for inflation at the end of 2012-13 is 5.96 per cent.

Current account deficit

The Current account deficit is projected to be $100 billion or about 4.7 per cent of GDP during 2013-14 with merchandise trade deficit projected at $213 billion or 9.9 per cent of GDP and net invisible earnings projected to be $113 billion or 5.3 per cent of GDP in 2013-14.

Pointing out that the CAD is still at a very high level, Rangarajan, said that the three categories that need to be dealt with are coal, gold and oil. The PMEAC Chairman pointed out that the import bill on account of oil will be $125 billion this fiscal which is 14 per cent higher than the previous year.

Fiscal deficit

As regards the Centre’s fiscal deficit, the PMEAC expects it to touch Rs 542,499 crore in 2013-14 as per the Budget estimates. In the revised Budget estimate of 2012-13 it was at Rs 520,924 crore.

The PMEAC Chairman felt that certain issues including ensuring speedy project clearances, reducing CAD, managing the capital account to ensure that CAD is comfortably financed, capital inflows will need to be encouraged and where necessary procedures streamlined apart from improving net energy availability and containing inflation needed to be tackled to ensure growth.

Room for rate cut

Rangarajan felt that the decline in WPI inflation gives greater space to monetary authorities to act, he said, adding that he did not want to make a direct comment ahead of the monetary policy on May 3.

The PMEAC Chairman said that: "We expect rupee to stabilise at the current levels."

PMEAC member V.S. Vyas added that agriculture is the silver lining due to good monsoon and policy measures.

ashwini.phadnis@thehindu.co.in