He says it is expected to touch 6.7 per cent which is better than last year

There are enough indications that the Indian economy’s growth rate would pick up in the second half of this fiscal. It will touch 6.7 per cent for 2012-13, Prime Minister’s Economic Advisory Council Chairman C. Rangarajan said on Monday.

Addressing reporters on the sidelines of the annual day celebrations of the Madras School of Economics (MSE), Dr. Rangarajan said the monsoon had turned out to be better than earlier predictions and the agriculture performance this year would also be better than what was expected a few months ago.

“Our own forecast is that the growth rate of economy in the current fiscal will be 6.7 per cent … that is a better shape than last year. I think the growth will pick up in the second half of this year. Enough indications are there,” said Dr. Rangarajan, who is also the MSE chairman.

The average growth rate in the next five years would be 8.2 per cent, with the economy picking up in the latter half of the period. “Over the closing period of next five years, the growth rate has to be up to nine per cent, in order to get an average growth rate of 8.2 per cent,” he said.

On the diesel price increase and cap on subsidised LPG, Mr. Rangarajan said the moves need to be appreciated in the larger context of ensuring against a runaway fiscal deficit and the country continued to be on the growth path.

While conceding that the diesel price hike would result in some increase in the wholesale price index as well as other price indices, Dr. Rangarajan said it was an appropriate measure in the medium term goal of containing inflation.

“In the absence of the increase of diesel price, the fiscal deficit would have been higher. Therefore, one has to balance against the other,” he said.

His argument was that even in the case of diesel, nearly two-third increase in the price of crude oil was being borne by the government and the oil companies and only one-third of it was being passed on to the consumers.

According to Dr. Rangarajan, while the need for subsidies in a country with a substantial poor population was undisputed, it was imperative that the subsidies were targeted and prudent. “We need to keep a watch on the level of subsidies … we should try to keep the subsidies at a level which is around 2 per cent of the GDP,” he said.

Earlier, in his presidential address at the annual day celebrations, Dr. Rangarajan urged the passing-out students to undertake any job and work diligently and honestly.

Tamil Nadu Governor K. Rosaiah who presented prizes, including the ‘S. Bhoothalingam Gold Medal’, said the creation of entrepreneurs, generating jobs, maximum utilisation of resources needed to be promoted to address challenges and overcome hurdles to compete globally.

“Our global competitiveness will depend on our continued ability to produce adequate number of high quality manpower at all levels of knowledge pyramid,” he said.