The Prime Minister’s economic advisory body is all set to revise its GDP outlook for FY’10 from the earlier estimate of 6.75 per cent, as it feels that the economic expansion would beat even the official projection of 7.2 per cent, on the back stunning industrial recovery.
“The industrial growth indicates that there is an upward bias to the Central Statistical Organisation, estimate of 7.2 per cent growth rate for the current fiscal,” Prime Minister’s Economic Advisory Council (PMEAC) Chairman C. Rangarajan told PTI.
He added that the PMEAC would review the current economic situation and come out with Economic Outlook for 2009-10 before Budget, which would be unveiled on February 26.
In October 2009, PMEAC had come out with the GDP outlook and said that the country’s economic growth could touch 6.75 per cent in the current fiscal.
In the changed circumstances of stunning second quarter economic growth and industrial production expansion in December, the council in all likelihood would revise upwards its growth projections for the current fiscal.
Mr. Rangarajan added that industry is likely to grow close to 9 per cent in the current fiscal.
Industrial production surged to a 16-year high of 16.8 per cent in December 2009, against the contraction of 0.2 per cent in the same month a year ago, driven by a robust performance by the manufacturing sector, particularly consumer durables.
Also, economic growth surged to 7.9 per cent in the second quarter, after 6.1 per cent expansion in the preceding quarter and 5.8 per cent each in the previous two quarters each.
According to advance estimates released by the CSO, economy is pegged to grow at 7.2 per cent during 2009-10, lower than the optimistic projections of the RBI and Finance Ministry, though higher than 6.7 per cent a year ago.
Bolstered by stunning growth in the second quarter, the Finance Ministry in its mid-term review had projected the economy to grow by 7.75 per cent this fiscal and the RBI pegged it at 7.5 per cent.
Advance estimates are put out by the CSO to help the Finance Ministry calculate various figures like fiscal deficit in the Budget. It is based on the actual half yearly figures, partial figure for third quarter and only projections for the fourth quarter.
Mr. Rangarajan further said that strong industrial production (IIP) numbers will likely put in motion the process of fiscal consolidation by withdrawing some of the stimulus measures.
In order to help the industry tide over the impact of the global financial crisis, the government came up with three stimulus packages sacrificing Rs 1.86 lakh crore in revenue.
The stimulus packages, which included tax cuts and raising public expenditure, are estimated to push the fiscal deficit to 6.8 per cent of the GDP from 6.2 per cent a year ago.
