The growth in gross domestic product (GDP) in the quarter ended June may have been above the estimates of brokerage firms. However, it didn’t surprise Prime Minister’s Economic Advisory Council Chairman C Rangarajan. In an interview with Indivjal Dhasmana, he says 5.5 per cent GDP growth is consistent with the council’s projection of 6.7 per cent growth for this financial year. Edited excerpts:
Many analysts had pegged economic growth in the quarter ended June at sub-5.3 per cent. But it stood at 5.5 per cent. From here, where is it headed?
First, let me tell you the numbers are in line with our projection of 6.7 per cent growth for this financial year, against 6.5 per cent in 2011-12. When we arrived at that figure, our estimate for the first quarter GDP figure was quite close to the number released today. On a longer duration, from 2014-15, we can come on a track of eight per cent growth for four to five years.
How would various sectors fare?
Agriculture growth may be better than our estimate of 0.5 per cent. However, we are not changing our estimate right away. In August, rains stood at 100 per cent of the long-period average. Construction has done really well, which is corroborated by the steel and cement output numbers.
What about manufacturing, which grew just 0.2 per cent in the quarter ended June?
Manufacturing would fare better. In the first half of the year, it would be subdued. However, in the second, it would pick up, partly because of a low base and an actual pick-up.
As growth recorded an uptick sequentially, do you think the Reserve Bank of India (RBI) may not cut policy rates next month?
RBI would consider inflation numbers before taking a call on the policy rate.
The government’s final consumption expenditure rose nine per cent in the quarter, against 4.89 per cent in the year-ago period. Do you think the Centre’s fiscal deficit would come under pressure ?
The fiscal deficit would depend on overall expenditure, relative to revenue, throughout the year. Finance Minister P Chidambaram has already announced a committee on fiscal deficit. I suppose some action would be taken on that front. The government would try to keep the deficit at the budgeted level (5.1 per cent of GDP) for this financial year.
What steps by the government do you foresee?
Reining in fiscal deficit to the budgeted level would be contingent on some action, particularly on the subsidies front. Some action would have to be taken on diesel and liquefied petroleum gas.
