Even while maintaining his projection of 8.5 per cent growth for the current fiscal, Prime Minister Manmohan Singh on Tuesday expressed cautious optimism over the country's overall economic scenario in view of the fresh global uncertainties stemming from the sovereign debt crisis in the Euro-zone.
Releasing the first anniversary report of the UPA-II government at a function here, Dr. Singh said: “In the current financial year, the economy is expected to grow at 8.5 per cent. This is one of the best performances in the world and reflects the strong fundamentals which we have built over several years.”
Alongside, however, without alluding to the sovereign debt crisis in Greece, which has surfaced soon after a breather from the global meltdown, and spreading like a contagion to other countries in the Euro zone to impact the rest of the world, Dr. Singh said: “There are uncertainties on the horizon, but on the whole I look to the year ahead with cautious optimism.”
He referred to the “exceptionally difficult and challenging period” of “an unprecedented global financial crisis and also a severe drought in 2009” and pointed to the economic management over these years which helped to minimise their effect on the growth momentum. With the fiscal stimulus packages put in place, the country posted a growth of 7.4 per cent in 2009-10, a tad higher than the 7.2 per cent projected earlier, which marked a recovery from the slide to 6.7 per cent in 2008-09.
However, even as the Euro-zone crisis could impact developing economies owing to cut back in spending and financial pressures spilling over to Spain, Italy and Portugal, Dr. Singh hinted that it would be essential for India to return to the path of fiscal prudence.
“Like other countries, we resorted to fiscal stimuli to deal with the fallout of the global slowdown. It has worked well, but now, we must return to the path of fiscal prudence leading to a calibrated reduction in our fiscal deficit. [At the same time], we must work to ensure that the economy grows so that our resources expand, enabling us to spend,” he said.
Dr. Singh admitted that the pressure on prices was one of the major problems which the government is faced with at present. Though to a large extent, it is an aftermath of the drought last year, “but it needs firm action.” He assured the nation that the government would “continue to monitor the situation very carefully, and take whatever corrective steps are necessary to rein in inflation.”
The assurance of a respite from rising food prices is based on the forecast of a normal monsoon this year following which both the government and economists expect a cooling off in inflation. If that comes about, headline inflation, as projected by the Prime Minister earlier, is likely to ease to about five to six per cent by December.
In its ‘Report to the People 2009-10,' the government also sought to highlight the achievements in various flagship and social sector programmes aimed at inclusive growth to protect and improve the living standards of the vulnerable sections of society such as the National Rural Employment Guarantee Scheme, the Bharat Nirman and other schemes.
Alongside, the report also referred to the various ongoing programmes such as disinvestment and the reforms in the pipeline by way of the direct tax code.
