Full effect of recovery will only be visible in next fiscal: Rangarajan

Q&A with PMEAC Chairman

Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan expects India's economy to grow by just 5.5-6 per cent this fiscal, which is way down of 6.7 per cent expected by the council in August and 7.6 per cent projected in February. Though, he tells Dilasha Seth that agriculture and industry will pick up over the second half of this fiscal, he said full economic revival is expected in the next fiscal only. Excerpts:

India’s GDP grew by just 5.3 per cent in the second quarter of this fiscal, lower than 5.1 per cent in the first quarter and staying at 3-year low. Why are the economic activities not picking up?
Agriculture grew lower than Q1, while manufacturing did not pick up strongly. I expect growth in both agriculture and industry to pick up in Q3 and Q4.

For GDP to grow by 6 per cent this fiscal, as per your estimate, economy needs to expand by at least 6.5 per cent in the second half? Is that possible?
GDP would grow between 5.5 and 6 per cent in the current fiscal. Growth is likely to pick up in the second and third quarter, but the full effect of recovery will only be visible in the next fiscal.

You have said that growth will pick up in the second half. Will that be because of only low base of last year?
No. Not just the base effect, but recovery would be seen also because of the active steps of the government in terms of policy and of course the positive sentiment. I expect an increase in output of public sectors and infrastructure sector. All will have an impact.

Investment was the silver lining in the GDP data, as it grew 4.06 per cent this quarter against 0.66 per cent in Q1. Is it the beginning of recovery on the investment front?
Investment as a per cent of GDP has remained constant in the last year and this year and is not declining. It is expected to pick up in the next few months as the focus is on increasing production, creating infrastructure like roads, power generation and coal.

Agriculture weighed down Q2’s GDP growth. Will agri output also expand in the third and fourth quarter?
I cannot say about the third quarter, but agriculture should pick up in the fourth quarter as rabi crops are not affected by monsoon.

What about manufacturing growth?
Looking at coal, its production growth has turned positive, in contrast to negative growth in much of last year. Mining is an important element for the industry and manufacturing, so we may see manufacturing pick up from the third quarter onwards.