Government blames domestic economic woes on global uncertainties (Roundup)

December 9th, 2011 - 8:11 pm ICT by IANS  

Pranab Mukherjee New Delhi, Dec 9 (IANS) The government Friday blamed slowing domestic growth on the global economic turmoil and officially downgraded the gross domestic product (GDP) growth rate to around 7.5 percent in 2011-12 amid a warning that fiscal deficit target could be breached.

Replying to a debate in parliament on the price rise, Finance Minister Pranab Mukherjee blamed global uncertainties and
sky-rocketing prices of commodities for the high inflation that has plagued the country for over two years and slackening in growth.

“No country today can say we are isolated. What happens in any corner of any country can convert itself into an international crisis,” the finance minister said.

“Seven percent growth is not adequate for the country, but if you say it is all-time low that means you don’t keep a tab on facts.”

Mukherjee’s explanation even as he presented the mid-yearly review of the economy to the parliament. The review revised downwards the growth projections.

“The analysis of several data series and simple macro-econometric modeling lead us to forecast a GDP growth rate of 7.5 percent (plus or minus 0.25 percent) during 2011-12,” said the mid-year economic review presented by Finance Minister Pranab Mukherjee to parliament.

“We expect some revival next year, but the outlook remains mixed.”

The GDP in the first half of 2011-12 registered a growth rate of 7.3 percent over the first half of 2010-11. The growth rate of first quarter was 7.7 percent.

In the quarter ending September, the GDP growth slowed to its slowest pace in over two years and was recorded at 6.9 percent.

Latest inflation data also came to the rescue of the government. Food inflation fell to a three and a half year low at 6.6 percent for the week ending Nov 26. While overall inflation is still close to double digits, policymakers expect it to start declining and come down to 6-7 percent by March-end.

The index of industrial production (IIP)– a barometer of factory output — showed industry production in for September at 1.9 percent, the slowest in over two years as rising interest rates and a slump in investments started to bite.

The review pointed at the slow growth in manufacturing, construction and mining sector for slackening pace of economic expansion.

Data for the second quarter showed manufacturing growing at a sluggish 2.7 percent, agriculture output rising by 3.2 percent and the construction sector managing an expansion of 4.3 percent. Mining and quarrying, however, saw a decline.

The mid-year review also warned of the government not being able to meet the fiscal deficit target of 4.6 percent in the current fiscal.

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