Mid-year analysis estimates FY '14 growth rate at 5%

Sets WPI inflation target at below 6%

Mid-year analysis estimates FY '14  growth rate at 5%

The government’s Mid-Year Economic Analysis for 2013-14 on Thursday pegged India’s economic growth 5 per cent and said an economic recovery, although weak, is expected to gather pace in coming quarters.

Amid widespread fears of slowing demand in the economy, the report noted that despite cuts in government spending, private consumption expenditure and gross fixed capital formation have increased.

“The demand side impetus to growth is gradually gaining momentum with the strengthening of private consumption and investment and with exports making an impressive turnaround in the first half (April-Sept) of 2013-14,” the report tabled in Rajya Sabha said Thursday.

These trends indicate that the structural reforms undertaken by the government have started to bear fruit, and a decisive pick-up in economic activity can be gradually expected over the next few quarters," it said.

However, it may take some more time for the economy to reach its higher growth potential, it said.

"Reverting to a real GDP growth rate of above 8 per cent plus would take some more time as cyclical factors also need to revive alongside a restoration of demand based on expectations of sustained recovery," it said.

The mid-year analysis, a flagship document of ministry of finance, said government’s fiscal consolidation was on track. For the current financial year, the government has pegged its fiscal deficit target at 4.8 per cent.

WPI inflation target

The inflation rate based on Wholesale Price Index needs to be controlled below 6 per cent for the Reserve Bank of India to support economic growth, the government said Thursday in its Mid-Year Economic Analysis for 2013-14.

"(It requires) controlling inflation further (WPI inflation belowthe level of 6 per cent), so that necessary leeway is available to the RBI to support economic recovery," the report said.

India's headline inflation rate, based on the Wholesale Price Index, had fallen to a five-month low of 6.16 per cent in December from a 14-month high of 7.52 per cent in the previous month.

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