Economic growth will fall below 6 percent: Kaushik Basu

July 31st, 2012 - 6:35 pm ICT by IANS  

New Delhi, July 31 (IANS) India’s economic growth will fall below 6 percent in the first half of the current fiscal but would pick up thereafter and inflation would moderate to 7 percent by September, Kaushik Basu, outgoing chief economic advisor, said Tuesday.

“In the first two quarters, growth will remain below 6 percent. Hopefully, there will be a pick up after that,” Basu said here in his last media interaction as chief economic advisor in the finance ministry.

The country’s gross domestic product (GDP) growth slumped to nine year low of 5.3 percent in the quarter ended March 31, 2012.

In financial year 2011-12, the GDP growth slumped to 6.5 percent as compared to 8.4 percent in the previous year.

In contrast, Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters separately that the economy is expected to grow in the range of 6 to 6.5 percent in the current financial year.

On price rise, Basu said core inflation is likely to come down to 7 percent by September.

“My expectation is that inflation in the month of September will go below 7 percent,” he said.

Core inflation was recorded at 7.25 percent in June as per the latest available data. But the real worry is on food inflation, which remains in double-digit. Food inflation accelerated to 10.81 percent in June as compared to 10.74 percent in the previous month.

In the first quarter review of the monetary policy, the Reserve Bank of India Tuesday kept key policy rates unchanged for the second time since June saying lowering of rates would aggravate inflationary pressure.

Basu said the central bank’s move was in a right direction. “RBI has said pause. RBI has made a right move and the lowering of SLR is a very important small move. It will give right indication.”

The central bank cut the statutory liquidity ratio (SLR) by a percentage point to 23 percent to ease the flow of credit to industry. This move is expected to add Rs.60,000 crore liquidity in the markets.

Basu retired Tuesday.

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