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‘GDP growth target may have to be revised upwards’

NEW DELHI: With a GDP growth of seven per cent in the first six months of this fiscal as compared to 7.8 per cent a year ago, an enthused Finance Minister Pranab Mukherjee exuded confidence that the economy would post a growth of over seven per cent in 2009-10.

Commenting on the unexpectedly high GDP growth of 7.9 per cent in the second quarter this fiscal, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “... this performance [growth in second quarter] does suggest that there may well have to be an upward revision in GDP growth of 6.5 per cent, which has been projected so far.” Likewise, expressing surprise, RBI Deputy Governor Subir Gokarn said: “Clearly, this is better news than we could have expected and we will have to review the forecast for the year as a whole.”

Prime Minister’s Economic Advisory Council (PMEAC) Chairman C. Rangarajan also felt that the target of 6.5 per cent GDP growth for the current fiscal “may have to be revised upwards following the robust second quarter numbers.”

Evidently, even as India continues to maintain its track record of being the second-fastest growing economy in the world after China, the unexpected performance would tend to give rise to other connected anxieties. There is a general perception among economists that with the economy firmly on the revival path, the government and the Reserve Bank of India should now prepare for withdrawing the fiscal stimulus measures so as to contain the inflationary pressures. Sooner than later, the focus will have to shift to reining in food inflation which has already breached the 15 per cent mark in the second week of November. However, Mr. Ahluwalia is of the view that “we should look at the position [exiting stimulus] at close to February.”

As for the specifics of the GDP data, the construction, which has a cascading effect on economy, grew slower this quarter at 6.5 per cent as against 7.1 per cent in the earlier quarter and 9.6 per cent in the like quarter last fiscal. However, business services and realty rose by 7.7 per cent as against 8.1 per cent in the previous three months and 6.4 per cent in July-September last fiscal.

Trade hotels, transport and communication grew faster at 8.5 per cent as compared to 8.1 per cent in April-June this fiscal, but lower than 12.1 per cent in second quarter of 2008-09.

However, electricity, gas and water supply at 7.4 per cent and mining and quarrying at 9.5 per cent grew at a faster pace than earlier this fiscal and the second quarter of the previous fiscal.

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