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Monday, Nov 10, 2008
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GDP growth may slide to 7 p.c., says Council

Special Correspondent

Growth can be between 1.5 and 2.5 per cent lower: Ahluwalia

“We will still be recording the second highest growth rate in the world [after China]”
“Government should take counter-cyclical steps to tide over crisis”

NEW DELHI: Chairman of the Prime Minister’s Economic Advisory Council Suresh Tendulkar on Saturday projected a slide in the Gross Domestic Product (GDP) growth to seven per cent this fiscal in the wake of the economic slowdown stemming from the global financial crisis.

Speaking to journalists here on the sidelines of a Planning Commission meeting to review the implications of the global meltdown, Dr. Tendulkar said: “My gut feeling is that it [GDP growth rate] may come down to seven per cent ... we will take another look in January taking into account the data which are coming.”

In August this year, the Council had projected a GDP growth of 7.7 per cent for the current fiscal. Noting that there were some positive and negative factors which would have implications on growth, he said: “One or two decimal points above and below seven per cent should not be a worry. Seven per cent growth should not worry us. We will still be recording [the] second highest growth rate in the world [after China].”

Going by the projections of various economic think tanks in their presentations before the Planning Commission, the global meltdown could pare India’s overall growth by about 1.5-2.5 per cent in the next two years. “There is a lot of uncertainty but compared to the base run, growth can be between 1.5 and 2.5 per cent lower,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said.

Mr. Ahluwalia pointed out that even as the country would face “a difficult time for the next two years,” the adverse impact of the crisis would be minimised by “as much as we can by looking at contra-cyclical policies.” While growing at a high rate, which might still be lower than the Eleventh Plan projections, he said the Indian economy would be back on its targeted growth trajectory by the time the world economies take to the recovery path in the third year.

As per a forecast by the Delhi-based National Council for Applied Economic Research (NCAER), the GDP growth this fiscal could slip to 6.2-6.7 per cent as much would depend on the negative impact of the financial crisis and the steps taken by the government to neutralise it.

Slump likely

On a more pessimistic note, the Institute of Economic Growth said the growth rate during the 11th Plan period could slump to as low as 5.3 per cent from an average of 8.38 per cent envisaged in the document. However, on the higher side, the average growth during the Plan period could be 8.05 per cent, it said.

Presentations were also made by the Mumbai-based Indira Gandhi Institute of Development Research and the Indian Statistical Institute, Bangalore.

Concluding the obvious on the basis of presentations made by the institutes, Mr. Ahluwalia said: “It is very clear that if you have the kind of negative outcome in the global economic situation [as you have at present], it will have a negative impact on India.”

To tide over the crisis, Planning Commission member Kirit Parikh noted that the government should take counter-cyclical steps by way of fiscal measures such as spending more money on infrastructure as it would then increase the productivity of the economy.

Talks were on with various Ministries on the measures that should be taken to mitigate the adverse effects of the crisis, he said.

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