Economy May Revive By Q4

The Indian economy is set to pick up by the fourth quarter of the current financial year and there is no need for 'pump-priming' in excess of budgeted expenditure for that, said Citigroup economists.

Clifford CH Tan, director (Asia Pacific economic and market analysis), Citigroup, and Rohini Malkani, economist at Citibank and Salomon Smith Barney, said that fiscal stimulus is necessary in addition to lower interest rate regime for global recovery, but in case of India sticking to the budgeted expenditure level will be enough.

Malkani pointed out that during the past couple of years the Central government contained the fiscal deficit of the country by reducing the capital expenditure.

 

"There is hardly any room for cutting the capital expenditure any more," she said. Malkani said that the better growth in the agriculture and the higher expenditure in infrastructure like roads will be the key driver of growth.

Citigroup, however, said that the growth of the gross domestic product will be under five per cent (4.8 per cent). The growth will be higher at 5.5 per cent in 2002-03, the group projects.

According to Malkani, in agriculture despite a good monsoon and distribution, the softer price regime will play the spoilsport.

She said, "India already has a huge food-grain stock, much higher than the buffer stock requirement and a better output will depress the prices further. However, in any case agriculture should post a growth of 4.2 per cent during the current fiscal against its long-term average growth of three per cent."

On the foreign direct investment front, Tan said that the slow reform process is hampering inflows. Tan said, "You have to show progress in your reform procedure. India started well, but the process has been slowed down. It needs to pick up once again for attracting more foreign funds."