GDP likely to grow 5.5 percent in 2015: Mid-year review

India's economy is likely to grow at around 5.5 percent in the current fiscal year, the finance ministry said in mid-year review tabled in parliament Friday.

It projected that a 7-8 percent economic growth was reachable in the coming years and said inflation has fallen dramatically, while declining oil prices will help in containing the current account deficit (CAD) at around 2 percent of GDP.

In the first six months of 2014-15, economy grew at an annual 5.5 percent, the report said.

"Investment is yet to pick up significantly. But on the upside, inflation has come down dramatically.The year (2014-15) could end with growth around 5.5 percent," it added.

Based on the trend of receipts and expenditure relative to the budget, the finance ministry said the budget deficit target is in line with estimates.

The report added that the government expected no change in interest rates till the fiscal year ends in March.

Presenting the report, Finance Minister Arun Jaitley told the Lok Sabha that lower international crude prices will help keep down the current account deficit. Prices have plunged to a five-year low from over $100 a barrel in June to $58.

The Indian economy logged 5.3 percent growth in the second quarter of this fiscal, against 5.7 percent in the first quarter.

Consumer price index-based inflation, meanwhile, eased to a record low of 4.38 percent during November - from 11.16 percent during the corresponding month last year - on the back of lower food prices.

Industry's pitch for rate cuts and economic reforms has become sharper, with factory output slipping further to log a 4.2 percent drop in October even as retail inflation eased further to a historic low of 4.38 percent in November, official data showed earlier this month.

The tax base was weaker than expected due to "unanticipated moderation in inflation" and revenue projections were "over-optimistic", the report said.

According to it, there are stalled projects to the tune of Rs.1.8 million of which an estimated 60 percent are in infrastructure.

"In turn, this reflects low and declining corporate profitability.The ripples from the corporate sector have extended to the banking sector where restructured assets are estimated at about 11-12 percent of total assets," it said.

Despite the sprouting of green shoots, a robust recovery has still to fully take hold, it added.

The economy expanded at 4.7 percent in the entire 2013-14 financial year, marking a second straight year of below 5 percent growth.