Growth above expectations, may reach 9%: PMEAC

The prime minister's economic panel has said the economy is growing at a rate that is above expectations and is likely to expand by about 9 per cent this fiscal, higher than the earlier estimate of 8.5 per cent.

“It (GDP growth so far this year) is certainly above the original expectation of 8.5 per cent, may be close to 9 per cent,” Prime Minister Economic Advisory Council (PMEAC) chairman C Rangarajan told PTI.

Earlier, Finance Minister Pranab Mukherjee as well as PMEAC had projected 8.5 per cent growth for 2010-11.

However, the economy has shown recovery since the impact of global financial crisis that hit in 2008 and India's GDP has grown at 8.9 per cent in the first half of the current fiscal.

Hence, the government has now projected growth rate that is higher than 8.5 per cent.

Mukherjee has said that he expects the economy to grow by 8.75 per cent, while Chief Economic Advisor Kaushik Basu has projected growth rate of 9.1 per cent, subject to improvement in European debt crisis situation.

On whether high industrial production and GDP growth rate would prompt the RBI to tighten monetary policy further to tame inflation, Rangarajan said, "I think the RBI's decision will depend upon how the inflation behaves. That's the key factor."

Industrial production has expanded 10.3 per cent during April-October this year. For October, the Index of Industrial Production (IIP) showed a growth of 10.8 per cent.

The Reserve Bank is slated to announce quarterly monetary policy on December 16, while the inflation data for November would be released on December 14. For the month of October, Inflation was 8.58 per cent.

Rangarajan said inflation was still well above the comfort zone, adding, "If there is still tendency for inflation to fall in the next few weeks that would be the guiding factor as far as RBI is concerned."

To tame inflation, RBI had last month increased its short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each to 6.25 per cent and 5.25 per cent.