Stating that there will a strong pick up in domestic manufacturing in the second half which will give a impetus to growth, Prime Minister’s Economic Advisory Council chairman, C. Rangarajan on Thursday termed as pessimistic the projections of growth given by both World Bank and IMF on India’s growth and exuded confidence that India would post around 5.5 per cent growth in the current fiscal.

“The International Monetary Fund (IMF) and World Bank are unduly pessimistic. We think the growth rate will be between 5 and 5.5 per cent. We have projected growth rate of 5 per cent earlier, which I think still holds,” Mr. Rangarajan said on the sidelines of Global Conference on Financial Inclusion and Payment System here.

Earlier this month, the World Bank slashed India's economic growth forecast for the current financial year to 4.7 per cent from an earlier projection of 6.1 per cent. The IMF, in its World Economic Outlook, projected an average growth rate of about 3.75 per cent, based on market prices, for India in 2013-14, that is expected to pick up to 5.1 per cent next fiscal. The Prime Minister's Economic Advisory Council (PMEAC) had last month lowered the growth forecast for the current financial year to 5.3 per cent from 6.4 per cent it had projected earlier.

Mr. Rangarajan was of the view that agriculture will do extremely well monsoon had been extremely good which will result in pick up of rural demand. “As far as manufacturing is concerned, second half will show a definite improvement. We will see the impact of measures introduced in last five to six months. There will also be a strong pick up in manufacturing in second half. Therefore, we still stand by our earlier forecast. Indications are exports are picking up in August and September. In August and September export growth rate was double digit. That will also have an impact on domestic production,” he added.

Talking about the issue of financial inclusion, Mr. Rangarajan said the government should look at the idea of local area bank. “While I had given the idea a few years ago, only a few such banks operate now. There is a need to relook at the idea again,” he remarked.

Attributing the spiraling prices of onions to supply constraints, Mr. Rangarajan said this will only have a temporary impact on inflation. “We need to take action on the supply side, increase availability and see that market mechanisms are improved and availability or existing supply is evenly distributed to consumers,” he added.

He said there can always be a temporary increase in inflation. But once the availability increases, it is expected that supply will get augmented in coming weeks and then it will come down.