Thaindian News

New Delhi, Dec 18 (IANS) Amid concern over spiralling inflation, due mainly to galloping food prices, India Friday projected a 7.75 percent growth for this fiscal even as the world at large is still struggling to overcome the year-long slowdown.
“The remarkable turnaround of the Indian economy has been widely commented upon in India and internationally,” said the mid-year fiscal review for 2009-10, tabled in parliament by Finance Minister Pranab Mukherjee.

“With the growth in real gross domestic product at 7.9 percent in second quarter and its broad-based nature, the clouds of uncertainty have lifted,” said the 126-page review, listing the economic achievements so far and the challenges ahead.

“The growth outlook for the next two quarters and for the whole year is likely to be in the upper bound of the range predicted and may even exceed it,” said the review, while recalling the finance ministry’s best-case prediction of 7.75 percent in July.

The review also lists the government’s concerns and high on that list is rising prices, notably in such items of everyday consumption like potatoes, onions, cereals and pulses, that has seen the country’s annual food inflation balloon nearly 20 percent.

“The rise in the prices of primary articles of consumption of the common man that has been occurring in recent times is, indeed, a cause of concern. This needs to be attended on an urgent basis,” it says.

“The short-run pressure on food prices are likely to persist because of the weak monsoon which has affected the kharif (summer crop) production of food grains.”

The other areas of concern expressed by the review include:

-High fiscal deficit due to steps taken to counter the global slowdown

-Negative impact of capital inflows on rupee valuation and export competitiveness

-Stagnation in farm output since 1990s after reaching the fruits of Green Revolution

-Poor extension of infrastructure services to farmers

-Lukewarm in growth of credit, especially to industry

-The dilemma of the central bank in balancing between growth and inflation

The review, nevertheless, says the government and the central bank have not only taken timely steps to contain the fallout of global slowdown on the Indian economy but the measures have also worked.

“There is enough evidence to suggest that the fiscal policy measures undertaken by the government have worked. There is need to observe the growth in major components for a couple of quarters to confirm the self-sustaining nature of this recovery.”