Govt lowers growth forecast for current fiscal to 5.7%

The government on Monday lowered the growth projection for the current financial year to 5.7-5.9 per cent from 7.6 per cent estimated earlier, while pitching for supportive monetary and fiscal policies to improve investor confidence.

"Given ...an emerging scenario, it should be possible for the economy to improve the overall growth rate of GDP to around 5.7 per cent to 5.9 per cent for the year 2012-13," said the Mid-Year Economic Analysis tabled in Parliament.

The economy, it added, would have to record a growth rate of 6 per cent in second half of the current financial year to reach the desired growth rate. It grew by 5.4 per cent during April-September 2012-13.

The Economic Survey had pegged the growth rate at 7.6 per cent for this fiscal.

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To achieve 5.7-5.9 per cent growth, the Analysis said, "both fiscal and monetary policy, however, would need to be supportive to sustain investor confidence. The government will also have to address the concerns relating to structural supply side bottlenecks."

The economic growth rate during 2011-12 had slipped to the nine-year low of 6.5 per cent due to both domestic and global factors.

Earlier RBI had lowered the growth rate to 5.8 per cent for 2012-13.

Referring to inflation, it said, further moderation in price rise is likely to commence from the fourth quarter of the fiscal.

"Inflation at the end of March 2013 is expected to moderate to 6.8-7 per cent level," it said.

As regards fiscal deficit, the Analysis said, the government would endeavour to restrict it to 5.3 per cent of GDP as against 5.1 per cent envisaged in the budget.

The Analysis said there "are reasons to believe" that the slowdown has bottomed out and the economy is headed towards higher growth in the second half of the fiscal.

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It said agriculture is expected to improve because of better prospects with rabi crops benefiting from greater moisture content in the soil and dominance of irrigated wheat and rice crops.

The document further said that most services, particularly the trade, transport, communication and financial services, being largely driven by the performance of real sectors will also have a better growth.

The Parliament was informed that a fiscal consolidation road map announced by the government on October 29 has "considerably improved business expectations and perception of the domestic and global investors."

Referring to trade deficit, the document said it is expected that the gap in the current year would not be significantly higher than what it was last year.

"Consequently, it is reasonable to expect that the current account deficit as a ratio of GDP would be lower than what it was in 2011-12," the Analysis added.