Economy could grow around 6% in 2013: Basu

Says India's widening current account deficit is a cause of worry

India's economy could expand by around 6% in 2013, World Bank Chief Economist Kaushik Basu said today, attributing the current slowdown to global factors.

"It is very-very difficult time for the world... The World Bank's rough expectation is that in the calender year 2013, India is going to see growth rate of just short of 6%," said Basu at CD Deshmukh Memorial Lecture here.

Officially, the World Bank is slated to release global growth projections on January 15.

Amid global slowdown impacting India, the government had lowered the country's economic growth for the 2012-13 fiscal to 5.7-5.9% from its earlier projection of 7.6%. The GDP had expanded by 6.5% in 2011-12, which was nine-year low.

On India's current account deficit (CAD) which widened to record 5.4% of GDP in the July-September quarter, Basu said that though it is a cause of worry, there are market factors which will come into play to stabilise it.

"India has proper floating exchange rate, it [CAD] is not as worrying because there are automatic market stabiliser which will begin to kick in," he said.

The CAD, which represents the difference between exports and imports after considering cash remittances and payment, was $18.9 billion in the same period of a year ago and $16.4 billion in the first quarter (April-June).

A higher CAD has adverse impact on rupee value and affects foreign exchange reserves as well.

On high prices, Basu said, "The government should try to bring inflation down to 4-5%."

Before joining World Bank, Basu had served as Chief Economic Advisor to Ministry of Finance.