New Delhi, Oct. 1: The finance ministry expects the economy to expand by over 5 per cent in the current fiscal on the back of high farm output and promised steps to boost growth.
“It (GDP) will be more than 5 per cent, it cannot be less than 5 per cent,” economic affairs secretary Arvind Mayaram said when asked about forecasts by private analysts that growth could be lower than 5 per cent in 2013-14.
Mayaram is confident that growth will improve in the second quarter of the current fiscal mainly on account of an increase in the sown farm area, acceleration in the pace of plan expenditure and impact of projects cleared by the Cabinet Committee on Investments.
“As we are seeing growth clawing back, I am quite sure that the environment will be conducive for further incentives for growth and we will see whatever steps have to be taken,” Mayaram said.
The economy grew at a four-year low of 4.4 per cent in the April-June quarter of the current year. In 2012-13, growth was at a decade-low of 5 per cent.
“In the second quarter of the fiscal, GDP growth should be better than the first quarter... We need to incentivise growth... As far as the interest rate is concerned, it is completely the domain of the RBI and the governor will take a call on that,” Mayaram said. The RBI is scheduled to announce its second quarter policy review on October 29.
He said curbs on gold import announced by finance minister P. Chidambaram in August have started showing results.
Factory activity in India shrank for a second month in September, albeit not as sharply as in August, on a dearth of new orders which pushed firms to cut staff, a survey showed on Tuesday.
The HSBC Manufacturing PMI, compiled by Markit, rose to 49.6 in September from 48.5 in August, but remained below the watershed 50 mark that separates growth from contraction.
The index has hovered near that 50 mark from May but falling orders dragged it under in August for the first time in more than four years.
“Manufacturing activity continued to shrink in September. Order flows remain weak, especially export orders, and employment fell,” said Leif Eskesen, chief economist for India at HSBC.
Bank of America Merrill Lynch (BofA-ML) today lowered its CAD target for India for the current financial year to 3.2 per cent of the GDP from 4 per cent earlier. “We have cut down the 2013-14 CAD forecast to 3.2 per cent of GDP by pulling down the net gold import bill by $7 billion to $30 billion,” BofA-ML said.
Though CAD at 3.2 per cent of GDP is significantly lower than the 4.8 per cent it registered in 2012-13, “it still remains higher than the 2.4 per cent of GDP that we estimate as the optimal current account deficit”, BofA-ML added.