Without assigning any specific numbers, Finance Minister Pranab Mukherjee on Wednesday indicated that even as the country's long-term economic indicators remain robust, the targets set for overall growth and fiscal deficit for the current fiscal were unlikely to be met in the wake of the global financial turbulence.
In a candid overview of the state of the economy at the ‘Economic Editors' Conference', Mr. Mukherjee admitted that the ongoing global turmoil and consequent slowdown would impact the country's growth, thwart measures to control inflation and thereby pose a challenge to adhering to the fiscal deficit target.
“…dark clouds have gathered in the global skies once again, and these are casting a shadow on us…Let me not hide the fact that I have been disappointed by our growth performance over the last few months. It is evident that India's growth rate in 2011-12 will be less than what we were expecting in February when I presented the Budget. In the last few months, a number of factors, both international and domestic have impacted our economy,” he said.
Mr. Mukherjee attributed the domestic slowdown and rising inflation to the global problems, especially the rising crude oil and commodity prices in international markets which cast a huge economic burden and consequent near double-digit inflation which called for monetary tightening and rise in interest rates lead to a fall in fresh investments.
Most observers are expecting India's growth to go down to below 8 %. This is disappointing but at the same time we must not lose perspective of the global situation. There is slowdown all over the world…Even ten years ago, the news that India would grow by 8 per cent would be reason for celebration,” he said while noting that he would put a number to the fiscal's growth in the mid-year review to be placed in Parliament in December. Mr. Mukherjee said that while WPI based inflation had remained sticky at around 9 per cent during the first half this fiscal owing to a variety of reasons, he hoped that it would ease to about seven per cent by the end of March next year. Despite the monetary measures, while headline inflation has remained stubbornly close to the double-digit mark, the tight monetary policy followed by the RBI has also impacted growth during the year, he said. The source of inflation, he said, has since switched to non-food items owing to imported global commodity inflation — in particular, crude oil.
As for the measures taken by the government towards fiscal consolidation, Mr. Mukherjee stressed that the fiscal policy stance for 2011-12 remained broadly on track and complemented the monetary policy stance. Refuting the general perception about policy paralysis, Mr. Mukherjee listed a slew of reforms measures in the pipeline but regretted that the government could go ahead fast on them owing to the lack of numbers in Parliament.
“It is possible if we collectively do it. Therefore I don't blame anybody. I could have assured you here and now that all the legislations will be passed in the Winter Session but today unfortunately I cannot do so because I am 206 in Lok Sabha and 76 in Rajya Sabha,” he said during the interaction.
Appealing for support from all parties, he said: “It is not a help to the ruling party but to help India and the Indian industry to take advantage of the legislative measures that are required to expedite the reforms and for that Parliament must function.''
In particular, Mr. Mukherjee referred to the Direct Taxes Code and legislations on the Goods and Services Tax, insurance and pension reforms bill were before the Standing Committee which required support from the entire opposition.