The finance ministry admitted that there was a need to revisit the growth outlook for the current financial year and said it would be around 8.6%, lower than the earlier projection of 9%-plus expansion. A ministry note said that inflation would remain persistently high between August and December and then start easing, but the impact of high global commodity prices would still keep it in the 6%-7% range by March 2012. The finance ministry has launched an image makeover exercise to dispel doubts about the strength of the economic expansion in Asia’s thirdlargest economy after a slew of data pointed to a moderation in growth.
In the Economic Survey, a report card of the economy released ahead of the budget in February, the finance ministry had said the growth would be 9% (plus/minus 0.25) in 2011-12, based on the performance over the last five years and analysis of the trends of critical variables. But the impact of the stubbornly high inflation on growth as a result of the consistent interest rate tightening by the central bank seemed to have prompted the ministry to revisit its estimate. The RBI has said it is ready to sacrifice some short term growth to calm price pressures. “Thus, we could see a cyclical slowing in the first two quarters (8.4%), before growth picks up in the last two quarters (8.8%). Overall, growth is estimated to be marginally higher at 8.6% this year over 2010-11 levels of 8.5%,” a finance ministry document said on Wednesday. It said the signals on the demand and investment side were mixed and cautioned against making any generalization that the economy had entered a slowdown phase. “On the demand side, private consumption and exports are strong, but corporate investment is moderating. Here again the signals are mixed and given that demand numbers are subject to considerable revisions, any generalization needs to be made with caution,” the ministry note said, adding that it expects foreign direct investment to pick up. The RBI has raised interest rates 10 times in the past 15 months or so to tame inflation, and is widely expected to raise rates when it reviews monetary policy later this month. The impact of the rate increases has started kicking in as evident in slowdown of industrial and manufacturing growth and moderate car sales. Economists have also pared their growth estimates given the spate of data, which has pointed to a moderation in growth. The ministry said the government and the RBI were closely monitoring the price situation closely and would like to bring inflation down to 6 to 6.5%. It did not specify the time frame. Inflation has emerged as a policy headache for the past two years and has remained stubbornly high and currently hovers around 9.44%.
In the Economic Survey, a report card of the economy released ahead of the budget in February, the finance ministry had said the growth would be 9% (plus/minus 0.25) in 2011-12, based on the performance over the last five years and analysis of the trends of critical variables. But the impact of the stubbornly high inflation on growth as a result of the consistent interest rate tightening by the central bank seemed to have prompted the ministry to revisit its estimate. The RBI has said it is ready to sacrifice some short term growth to calm price pressures. “Thus, we could see a cyclical slowing in the first two quarters (8.4%), before growth picks up in the last two quarters (8.8%). Overall, growth is estimated to be marginally higher at 8.6% this year over 2010-11 levels of 8.5%,” a finance ministry document said on Wednesday. It said the signals on the demand and investment side were mixed and cautioned against making any generalization that the economy had entered a slowdown phase. “On the demand side, private consumption and exports are strong, but corporate investment is moderating. Here again the signals are mixed and given that demand numbers are subject to considerable revisions, any generalization needs to be made with caution,” the ministry note said, adding that it expects foreign direct investment to pick up. The RBI has raised interest rates 10 times in the past 15 months or so to tame inflation, and is widely expected to raise rates when it reviews monetary policy later this month. The impact of the rate increases has started kicking in as evident in slowdown of industrial and manufacturing growth and moderate car sales. Economists have also pared their growth estimates given the spate of data, which has pointed to a moderation in growth. The ministry said the government and the RBI were closely monitoring the price situation closely and would like to bring inflation down to 6 to 6.5%. It did not specify the time frame. Inflation has emerged as a policy headache for the past two years and has remained stubbornly high and currently hovers around 9.44%.
1 comment:
please take the services of INDIAN METROLOGICAL DEPARTMEN for CORRECT FORECAST. When it says it will rain heavily there is no rain and when it forecasts no rain it rains the whole day. same thing can be done with the Indian economy.
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