Jaitley expects inflation to dip further; says GDP growth may touch 5.9%

With the softening of international prices of crude oil and food items in the domestic market, Finance Minister Arun Jaitley has expressed hope that inflation will come down in the coming months.

Jaitley’s statement comes at a time, when the index for producer prices, better known as wholesale price index (WPI), is down to 2.38 per cent while index for consumer prices or retail inflation is at 6.46 per cent. This makes a strong case for interest rate cut by the Reserve Bank as it aims to achieve retail inflation target of 6 per cent by January 2016. Addressing the first meeting of the Consultative Committee attached to the Finance Ministry, on the topic ‘Sustaining Growth Momentum - The Road Ahead’, Jaitley said he expects growth to be in the range of 5.5-5.9 per cent. He said the priority of his Government is to bring back growth momentum into the economy.

“Higher growth leads to more revenue collections, better employment opportunities and increase in Government’s capacity to finance social sector programmes, among others,” he said.

GDP growth The Modi Government got a boost as the GDP registered a growth of 5.7 per cent during first three months (April-June) of the current fiscsal as against 4.7 per cent recorded during corresponding period of the previous fiscal. This also ended two years of below 5 per cent growth. Earlier, in the Economic Survey, the Government had estimated growth to range between 5.4 and 5.9 per cent.

Jaitley said the aim of the Government is to revive and sustain higher GDP growth. These include measures to increase savings, fiscal consolidation, keeping the CAD at moderate level, reviving investment cycle, encouraging growth in manufacturing sector, augmenting supply response to contain inflation especially food inflation, boosting infrastructure sector and exports, rationalise subsidies, and reforms in direct and indirect taxes among others.

Major challenges The Consultative Committee members pointed out the major challenges for the Government were to tackle the problem of increasing credit supply and controlling inflation. Some members suggested that the farmers may be given direct benefit by higher support prices for their produce rather than through subsidies, which most of the times do not reach them. There was also suggestion for simplifying policies and procedures enhance the growth. Some of the members suggested a review of the existing Crop Insurance Scheme as the farmers are not benefited by it.