Riding on the back of a pick-up in investment and improved investor confidence, the Finance Ministry on Friday exuded confidence that the economic growth will be 6 per cent and above in the current fiscal.
“Let me assure you the growth rate will not be below 6 per cent. Investments are picking up, there are greenshoots. The sentiment is improving, FDI is increasing. I have absolutely no doubt that you would certainly see positive movement in this,” Economic Affairs Secretary Arvind Mayaram told reporters on the sidelines of ADB annual meet in Greater Noida.
The Reserve Bank has projected the Indian economy to grow at 5.7 per cent in the current fiscal, which is much lower than the government estimation of 6.1-6.7 per cent.
“I think it needs to be acknowledged that the government is fully committed to reviving the investment sentiment,” he said.
In its annual monetary policy today, the RBI lowered the key lending (or repo) rate by 0.25 per cent, but said the scope for further easing of policy rates is limited.
Commenting on the RBI policy, Mr. Mayaram said: “We do not have any doubt when the next monetary policy is considered by the RBI, they would certainly see that there are adquate reasons for reconsidering the interest rates which are prevailing now and push for more growth”.
He said government have been taking steps to revive investment. The Cabinet Committee on Investment (CCI) which was set up to accord fast track clearance to large projects has already approved total projects worth Rs 93,000 crore in last four months.
“We believe there will be enough incentive to certainly look positively at the rate cut. But am not predicting, I am not even demanding. I am only stating how I see the situation on the ground,” he said.
Speaking to reporters at another session of the ADB, Chief Economic Advisor Raghuram Rajan said: “25 basis point is a good step. I think going forward if inflation stays low, if we can bring down food prices, hopefully they will have more room to undertake (policy rate cut)”.
The RBI has said inflation is above comfort level and projected WPI in the current fiscal to remain range bound at 5.5 per cent. The March WPI inflation stood at 5.96 per cent, lower than RBI forecast.
Mr. Mayaram said the RBI has said there is concern on growth and therefore there is need to incentivise growth but raised concern on food inflation. Food inflation as per the March numbers was in double digit.
“We believe food production is going to be quite significant this year. Rabi crop also is going to be a bumper crop and in another month, 15 days or so, once the crops start coming into the market there is going to be a cooling of food prices and then there are certain steps also which are being considered by the government which will perhaps bring the food prices down quite to a tolerable limit. Therefore we believe there is a continuous push towards creating the right environment for the monetary policy to become more liberal,” Mr. Mayaram said.
Commenting on RBI monetary policy ADB Managing Director General Rajat Nag said the 0.25 per cent cut in repo rate is the recognition of the fact that industrial output and investment demand is weak.
“RBI has to look at upward pressure on fuel prices, also high current account deficit and high fiscal deficit. All this limits the space for monetary easing,” Mr. Nag said, adding although this rate cut would help spurt growth, but should not fuel inflation.
Talking about CAD, which is difference between the outflow and inflow of foreign currency, Mr. Mayaram said would be less than 5 per cent in 2012-13 fiscal.
“CAD for FY’13 will be less than 5 per cent... We believe the confidence of the investors in the Indian economy is intact and there does not seem to be any reason to believe that this year the cap flows have been more volatile than they have been in the last 10 years,” Mr. Mayaram said.