New Delhi, Oct. 8: An upbeat finance ministry today predicted gross domestic product (GDP) growth at 6-7 per cent on the back of bumper monsoon crops and expectations of a good winter harvest.
The government also announced that it would reduce its market borrowing programme for the remaining six months of the fiscal from Rs 60,000 crore to Rs 25,000 crore as improved small savings collections, which are expected to cross Rs 60,000 crore this fiscal, could help fund borrowing needs.
The decision to pare market borrowings comes soon after an International Monetary Fund (IMF) report had warned: “India's large fiscal deficits and public debt are exacting an economic cost in terms of foregone growth.”
The government's chief economic adviser Ashok Lahiri said, “The Reserve Bank of India (RBI) had forecast a growth rate of over 6 per cent. With good monsoon crops and predictions of a bumper crop in winter, I will not be surprised if this is pushed to over 7 per cent.”
This is way ahead of a more conservative 5.5 per cent predicted by the IMF and 5.7 per cent predicted by the government's statisticians.
The IMF’s prediction was backed by good monsoons. It added that the growth could have been better if the fiscal deficit had not been ballooning so much.
Lahiri said the spin-off benefits of two bumper crops in succession would be huge increases in consumer spend, higher savings and investments which could see boom-time for industry and the services sectors.
Better times for farmers and industry meant higher tax revenues for the government, he said. This in turn meant that the government could keep its promise of limiting its budget deficit to 5.7 per cent.
Direct tax collection stood at Rs 33,440 crore in the first six months of this fiscal compared with Rs 29,750 crore in the same period last fiscal.