JOIN USEconomic growth will be lower than Budget target
He, however, added that policy measures underway will certainly sustain a robust GDP growth in the long run.
“Most observers are expecting India’s growth to go down to below 8 per cent. This is disappointing but at the same time we must not lose perspective of the global situation.
All I will say is that, even if India’s growth rate this year goes down, we will still be among the 10 or so fastest growing nations in the world,” he said at the two-day Economic Editor’s Conference in New Delhi.
India’s economy grew 9.3 per cent in 2007-08, but the global economic crisis pushed the growth down to 6.8 per cent in 2008-09. However, India was one of the earliest ones to recover from the crisis and posted a growth of 8 per cent in 2009-10 and 8.5 per cent in 2010-11.
Risk on growth
But the current global slowdown and the continuous pressure on international crude prices reigning above $105 per barrel have put a downside risk on growth, which slowed to 7.7 per cent in the first quarter (April-June) of 2011-12. Although services have done exceedingly well in the first quarter and agriculture too appeared to be robust, the lower than expected industrial production certainly pulled down the economic growth in the quarter passed by.
He also maintained that inflation will remain elevated till December and then start to come down as the monetary policy steps start to take effect with a lag and food supply improves with good monsoon so far.
Sticky inflation
Inflation remained sticky around 9 per cent during the first half of the current financial year with the global rise in commodity prices and liquidity enhancing policies of central banks in advanced nations exerting further pressure on inflation in recent times.
Despite monetary measures taken by the Reserve Bank since March, 2010, headline inflation has remained stubbornly close to the double-digit mark. It was 9.78 per cent in August.
On slowing economy and lower business sentiments, Mukherjee said that the stance of the Reserve Bank of India has been hawkish as compared to other major emerging economies such as Brazil and Indonesia, which have eased policy because of concerns about the sluggish global economy.
He, however, maintained that there was no one size fits all. “The central banks across the world may have been moving in a particular direction but the Indian central bank has its own concerns to take care of,” he said.