Rangarajan sees GDP growth at close to 6% in FY13

C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council (PMEAC), said here on Wednesday India was likely to have a GDP growth of close to six per cent in the current financial year and this would be one per cent higher in FY14.

“I think the growth this year would be between 5.5 per cent and six per cent, perhaps close to six per cent this year,” he told reporters here on the sidelines of the 47th convocation of the Indian Statistical Institute.

The economy grew at a faster pace of over eight per cent in consecutive years before falling to a nine year low of 6.5 per cent in 2011-12. Industrial output in the April-August period this year was 0.4 per cent, down from 5.6 per cent in the same period in 2011-12.

Rangarajan had earlier said the economic growth in the second (July-September) quarter would be around 5.5 per cent, as recorded in the first quarter, as the recent set of industrial output data does not show any improvement.

Expressing hope for next year, he said, “The growth in FY14 would be a per cent higher than this year, which would be close to seven per cent.”

Pitching hard for higher taxes on the super-rich in the country, Rangarajan said it would be one ways to arrive at a higher tax to GDP ratio.

“The tax to GDP ratio should be higher as demand and expenditure is going up. Therefore, we will have to explore ways. This is one way of doing it,” he said. When asked to define “super-rich”, he said this was just an idea at the moment and should be examined more carefully.

“There are two ways of doing it. One is to introduce an additional slab at a higher marginal tax rate. Two, keep the tax structure as it is and impose a surcharge on the income above a certain level,” added the former governor of the Reserve Bank of India, saying the second idea was simpler.

Earlier this week, the US Congress voted for raising taxes on rich Americans, as part of a resolution of crisis over the fiscal cliff. The US legislation raised taxes on individual earning of more than $400,000 per year, and on couples earning more than $450,000.