FinMin prepares to lower growth target

In an indication that India may not remain unscathed by the slowdown in the West, the Union finance ministry is planning to revise the gross domestic product (GDP) growth forecast downwards from the present nine per cent.

It is also likely to change its projection for inflation, in the light of a perceived fall in global commodity prices. Normally, such revisions are done in the mid-year review released in November/December. The revised number is likely to be announced in the first week of September, as the ministry is waiting for the GDP growth numbers for the first quarter, to be released on August 31.

It will also get data on the Index of Industrial Production (IIP) and inflation by the middle of the month. Tax collections for July will also be released shortly, giving an indication of the corporate sector’s health.

A ministry note last month had pegged GDP growth in 2011-12 to come down to 8.6 per cent, about half a percentage point higher than the projections by other agencies. The Prime Minister’s Economic Advisory Council, International Monetary Fund and the Asian Development Bank expect GDP growth at 8.2 per cent for this year. The World Bank and the Reserve Bank of India peg it at 8.2 per cent.

Last month, Chief Economic Advisor Kaushik Basu had said wholesale price-based inflation was likely to moderate to around six per cent by March 2012 from the current rate of a little over nine per cent. However, in its recent quarterly review, RBI had raised its overall projection for March 2012 to seven per cent. The PMEAC has projected it to come down to 6.5 per cent from 9.44 per cent in June.

The government pegged its fiscal deficit at 4.6 per cent this year after it successfully reduced it to 4.7 per cent of GDP last year, against 5.1 per cent as projected. This year, however, it might be a difficult task.

Economic growth fell below the psychological 7.8 per cent mark in the fourth quarter of 2010-11, due to a slowing in manufacturing.