‘As far as interest rate is concerned, the RBI will take a call on that’

The Finance Ministry, on Tuesday, said the economy would grow by over 5 per cent in the current fiscal on the back of higher farm production and investments. The Ministry also promised more steps to boost growth.

“As we are seeing growth clawing back, I am quite sure that the environment will be conducive for further incentivising of growth, and we will see whatever steps have to be taken,” said Economic Affairs Secretary Arvind Mayaram.

Dr. Mayaram reiterated that GDP growth in the second quarter would be higher than what was recorded in the first quarter, with industrial production improving owing to a rise in electricity, construction and coal production and an increase in sown area .

Economic growth in the April-June quarter was 4.4 per cent, the weakest quarterly pace in four years. “The Q2 GDP growth should be better than first quarter... The Finance Minister has said we need to incentivise growth. That continues to be the stand of the government. As far as the interest rate is concerned, it is completely the domain of RBI, and Governor will take a call on that,” he added.

On the current account deficit (CAD), he said it was expected to be less than $70 billion or 3.7 per cent of GDP for the full fiscal. “We would certainly hope the CAD would be less than $70 billion. The $70 billion CAD will be fully and safely financed without any recourse to dipping into reserves,” he said. The CAD, which is the difference between inflow and outflow of foreign funds, was at 4.9 per cent of GDP in the April-June quarter. Though the rupee had stabilised, one needed remain vigilant and encourage capital flows, he said. The FDI inflows this fiscal could exceed $24 billion, he added.

“We need to be watchful. We need to continue to work towards encouraging greater capital flows. We are encouraged by the current stability in rupee,” he said, ruling out any immediate curbs on imports. FDI inflow in April-June quarter was at $10.5 billion against $8.2 billion in the corresponding period last year.

Dr. Mayaram said curbs on gold import announced by Finance Minister P. Chidambaram in August had started showing results. Gold imports shall be restricted to 800 tonnes in 2013-14, he told reporters, adding that the current account deficit would be restricted to $70 billion (3.7 per cent of GDP) or lower this fiscal year.

On the fiscal front, Mayaram said the situation was under control. The government might not need to borrow more than the targeted amount, he felt. “The higher plan spending in the first-half of the year was deliberate to ensure speedier implementation of welfare programmes,” he said. “Revenue collections are historically higher in the second-half of the fiscal. The revenue targets will be met,” he added.

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