Better-than-expected agricultural growth may help lift the country’s economic growth to 5.5 per cent this fiscal, C. Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council, said here today.
This forecast is much higher than the five per cent gross domestic product (GDP) growth recorded in 2012-13.
It comes nearly two weeks before the PMEAC’s formal unveiling of its growth outlook report this fiscal.
Thanks to good rainfall so far (14 per cent above normal) and higher Kharif acreage, policymakers are betting that agricultural growth this fiscal may be three times higher than the previous year’s 1.9 per cent growth.
Rangarajan sees agriculture recording 4.5-5 per cent growth this fiscal.
Manufacturing growth this fiscal is expected to be better than last year’s growth rate of 1.2 per cent, Rangarajan said at a Phddci seminar on Refuelling India’s Growth Story.
He expressed confidence that current account deficit (CAD) this fiscal will be contained at about $70 billion.
At 3.7 per cent of GDP, this CAD level ($70 billion) is a good one percentage point lower than the 4.8 per cent level in previous year, Rangarajan pointed out.
“I do not see any problem in financing this expected CAD of $70 billion this fiscal even as everybody recognises that capital flows to emerging markets may go down during this year.”
In 2012-13, India’s CAD was about $88 billion and this was comfortably financed with capital flows of about $90 billion.
Rangarajan also highlighted that the CAD forecast of $70 billion this fiscal is based on the limited assumption of a small pick up in exports and reduction in some key imports.
“If exports pick up, it will result in CAD going lower than $ 70 billion. I won’t be surprised if we can take CAD lower than that ($ 70 billion),” he added.
Rangarajan said that economic growth is necessary for solving many of the country’s problems. “We cannot sacrifice growth,” he said.
He maintained that both monetary and fiscal policy will have a role to play to contain demand pressures even if inflation is largely due to supply-side bottlenecks.
“How can one ignore inflation when it was at double digit levels for an extended period? So monetary policy has to be used,” he said.
srivats.kr@thehindu.co.in