New Delhi, Nov. 14: The government today sounded an upbeat note on the economy by raising the growth forecast for the year to over 7 per cent this year and predicting that the inflation rate would tumble to around 4 per cent.
The government has been worried by the rising inflation — currently ruling at 5.01 per cent — and has been keen to tamp it down in an election year.
The robust growth projected in the economy comes on the back of the best monsoon in a decade.
“We are confident and optimistic that the growth rate will top 7 per cent,” Ashok Lahiri, chief economic adviser told reporters while releasing the mid-year economic review.
“What we need for faster economic growth is a second green revolution along with growth in external sector, structural reforms and infrastructural growth,” he told reporters.
The growth estimation is in line with the country’s central bank Reserve Bank of India's growth forecast last month of 6.5-7.0 per cent.
The mid-year economic review also estimated an 8 per cent farm sector growth with an all-time high foodgrains output of 220 million tonnes.
Foodgrain production had touched its highest level of 212 million tonnes in 2001-02.
Finance secretary D. C. Gupta said the effect of the strong monsoon this year would show up in the second and third quarters.
“The Central Statistical Organisation (CSO) growth figures of 1.7 per cent for the agriculture and allied sectors against 2.7 per cent a year ago in the first quarter period is due to the pre-monsoon period,” he said.
But the economic review said the ‘fall’ in export growth is a source of concern and that food subsidies are becoming ‘unsustainable’.
Earlier this year, the government had forecast that the economy would grow at more than 6 per cent this year. Last year (2002-03), the economy grew at barely 4.3 per cent after an unprecendented drought that damaged farm sector growth.
Asked if the mid-year economic review was released ahead of the Parliament session to gain political mileage in the forthcoming Assembly elections, Lahiri said: “The mid-year review had to be released on time and this year the winter session of Parliament is starting late.”
“Expenditure has been under control, growth has been higher than what we expected and there is buoyancy in tax collection,” said Gupta.
“There is a need to realign domestic commodity prices with international trends and suggested structural reforms like removal of inter-state trade barriers,” he added.
Revenue secretary Vineeta Rai said revenue collections, both through direct and indirect taxes, would be higher than the estimated growth of 16 per cent.
Net direct tax collections rose 18.6 per cent in the first seven months of this fiscal from a year ago to Rs 38,758 crore. Customs duty collections stood at Rs 27,976 crores while excise tax revenue was Rs 47,678 crore.
“For the first time in the last 15 years, we would exceed tax collection but there are some revenue pressure points like customs collection,” Rai told reporters. “However, the inclusion of more areas in the services sector would keep the overall tax collections high.”
Rai said revenue collection leapt 8.82 per cent to Rs 1,14,412 crore in the first seven months (April-Oct) of the financial year driven by a 36 per cent higher corporate tax collection.
However, income tax registered a lower growth at 5.4 per cent in the seven month period of the financial year, she added.