Economy recovering but modestly: Pranab

Finance Minister Pranab Mukherjee today exuded confidence that economy will pick up during the second half of current fiscal but overall growth will be moderate and said the stimulus for revival of industry would not be an annual affair.

"I am confident that in the third quarter and the fourth quarter it will be possible for us to have good growth but this growth will not be as good (as during the last year)," Mukherjee told journalists at the Women's Press Corps.

Hoping that industry would follow the growth trend of July, a month that saw factory output rising by 6.8 per cent, the Minister said that it was imperative for him to give the stimulus packages to help economy fight the effects of global financial turmoil and this resulted in higher fiscal deficit.

"If the stimulus was given, it was a one-time measure. One cannot expect this would be repeated every year... Had I not reacted, my fiscal deficit would not have gone high," he said but cautioned that high level of budgetary gaps were not sustainable.

Asked about the opposition to disinvestment by some constituents of UPA, Mukherjee said, "I will manage the coalition as we have done it in the last five years... After all what is politics, it is to manage contradictions."

On drought, he said, the adverse impact, particularly on the paddy crop, was over and added "with this rain, I hope improvement. We have suggested to the state agriculture ministers to have short duration crops". The Centre, he said, would provide seeds for such crops.

Referring to 6.8 per cent industrial growth in July, Mukherjee said, "It is picking up. I hope that it will continue."

The Index of Industrial Production (IIP) showed a rise of 6.8 per cent in July year-over-year, while the growth was 6.4 per cent in the corresponding month last fiscal.

Pointing out that signs of improvement were visible in critical sectors like cement, steel, consumer goods and housing, he said it would not be able to compensate for decline in exports.

"There is a possibility of (sustaining upswing in industrial growth) but that possibility is not adequate to compensate for shortfall in exports," he said, adding, unless demand in industrial world improves, exports will not pick up.

Answering questions on price rise, the Minister said: "We can try to ameliorate the adverse impact of the rising (commodity) prices, but if the procurement prices are enhanced, naturally the market prices will go up."

The government, he added, had significantly enhanced the Minimum Support Prices (MSPs) of wheat and rice in the last five years.

As regards the shortage and rising prices of pulses, Mukherjee said, "Every year we have to import pulses (to bridge the demand-supply gap). We have also decided that there will be a mission mode approach to augment pulses production."