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Economy may grow 5.5-6% in 2012-13: Rajan

New Delhi, Dec 15, 2012, DHNS: 22:16 IST

Need to be cautious on spending front

Chief Economic Advisor Raghuram Rajan
A marginal improvement in growth in the second half of the year is likely to enable India to post a 5.5 to 6 per cent GDP growth rate in 2012-13, according to Chief Economic Advisor Raghuram Rajan.

“I would be surprised if there is more deterioration (in growth rate) from here. The numbers that have been talked about are in the 5.5-6 per cent range. And I feel comfortable sitting with that,” he told reporters on the sidelines of the Ficci AGM here.

Referring to the recent IIP number that indicated a bounce back at 8.2 per cent in October, 2012, compared to a contraction in October last year, he said, “I think it is too early to say confidently that the economy has turned the corner ... Given that the beginning of the announcements that increased confidence, buoyancy in the stock markets started in September, this creates an environment for business to start investing.”

He said the government would do its best to stick to the 5.3 per cent fiscal deficit target for 2012-13, while advising fiscal prudence. “We have to be careful about everything we spend on. That’s how we are going to get back on fiscal track, being careful.”

On the recent decline in WPI inflation, Rajan said, “As we go into the next year, some softening of inflation is to be expected. Certainly that core inflation came down quite strongly in the latest numbers is a reason for confidence". The WPI inflation fell to a 10 month low of 7.24 per cent in November 2012 from 7.45 per cent in October.

To a query on whether increasing tax would help curb gold imports, Rajan said, "The better approach for us is to make financial instruments more attractive.We need to see the process of gold import, if people are holding it in gold bars, then we have to see is if we can make the financial instruments more attractive.”

The import of gold had declined to 398 tonnes in April- October of the current fiscal, from 589 tonnes in the corresponding period last year. In value terms, it has declined from Rs 1.40 lakh crore to Rs 1.15 lakh crore.

The economic growth slowed to a nine year low of 6.5 per cent in 2011-12 and this year, too, the GDP growth, as per RBI's estimates, is likely to be 5.8 per cent. In the three years preceding the 2008 global economic crisis, India was growing at a rate of more than 9 per cent.

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