GDP growth may be around 6% for FY '14

Interview with PMEAC chairman

With macro economic numbers released yesterday clearly showing that recovery would be a gradual process, Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan expects economic growth to be quite low in the first quarter of 2012-13. The key adviser to Prime Minister Manmohan Singh tells Somesh Jha that his think-tank is in the process of reviewing GDP growth numbers for the current financial year. The Council's current projection for GDP growth stands at 6.4% for the year against a decade low growth of 5% in 2013-14. Edited interview:

With the industrial output contracting 1.6% in May, 2013 and the retail inflation moving up to 9.87% in June, what do you expect of the Q1 GDP growth?

The Q1 growth would obviously be subdued. But I do expect that the impact of the measures taken in the last six-seven months will be felt in the current fiscal and therefore we can see a pick up in the second half. The pick up could become visible in the second quarter, but more particularly in the second half.

Merchandise exports contracted 4.56% in June, 2013 and the Index for Industrial Production (IIP) also comprises exports. Do you expect the IIP for June to be low as well?

The numbers in June would be pretty difficult to predict at present, but it would remain subdued.

Looking at these numbers, do you think that the Indian economy will grow by 6.4% in the current fiscal, as projected by your Council?

We are making a re-assessment. I think we will come out with our revised outlook in August. It appears that the growth rate could be around 6%.

With the industrial output going down, do you think that the industries require a boost in the form of a repo rate cut by the Reserve Bank of India (RBI) later this month?

The RBI takes into account several considerations. Growth is subdued and, therefore, it requires stimulus. But, at the same time the retail inflation is still at a high level and there is pressure on the rupee. Therefore, RBI would also want to take into account the WPI numbers which would be released in a few days and then take a decision. The change in prices and the external situation would be a major factor for RBI.

So, do you think it would be difficult for RBI to cut the rate?

I would not like to make any comment on that but the factors that would come into account are external situations along with growth rate. The ability of the central bank (to cut rates) will be increase if the price trend and the pressure on the rupee ease.