FM lowers GDP growth target to 7.5 per cent
Fiscal stimulus unlikely, need to push reforms
Finance Minister Pranab Mukherjee, on Friday, lowered the economic growth projection to around 7.5 per cent for 2011-12 from his budgetary estimate of 9 per cent.
Speaking at a public function on Friday, he added that despite uncertain global economic outlook, the government was not in a position to roll out fiscal stimulus now as it had done in crisis year of 2008-09.
“Considering the current global context and the slowdown in the domestic industrial sector, the growth performance is not all that disappointing. Going forward, I am confident that we will be recovering some of the loss in our growth momentum and may end the year over 7.5 per cent,” Mukherjee said.
No fiscal stimulus
Mukherjee underlined the need to push reforms to fast track economic growth as unlike in 2008 crisis, the government this time had limited scope to boost spending to create demand and spur growth.
“When the adverse impact of the 2008 crisis was felt in the economy we could generate domestic demand through a stimulus package, but today, I am not in a position to provide that kind of fiscal stimulus,” he said. Another concern expressed by the Finance Minister was flight of capital flows from India causing volatility in the stock market. FIIs withdrew over Rs 3,200 crore from the Indian securities market in the month of November.
“The current volatility in the stock market and withdrawal of FIIs have a direct correlation with the euro zone crisis, so it will have some impact, particularly on FII flows,” he said.
On the problem of inflation, he ascribed this to the improved purchasing power of the people as a result of the sustained high economic growth.
“We have been confronting the challenge posed by inflation in the past two years. Sustained high economic growth in recent past has led to improvements in purchasing power in both rural and urban areas.”
