In line with the Reserve Bank's prognosis on the economic scenario, Union Finance Minister Pranab Mukherjee conceded that it would not be possible to achieve the targeted GDP (gross domestic product) growth rate of nine per cent during the current fiscal owing to volatility in global commodity prices.
“Due to volatility in international commodity prices and other supply constraints, it may not be possible to achieve the growth rate of nine per cent (+/-0.25 per cent) for the current financial year,” Mr. Mukherjee said while addressing probationers of Indian Economic Service (IES) here.
However, he expressed confidence that headline inflation [is] moderate to 7.0-7.5 per cent from the current high of near nine per cent.
Mr. Mukherjee felt that one of the major challenges that India faces is to “achieve sustained GDP growth at the rate of 9-10 per cent with fiscal prudence and moderate inflation”.
High growth was also essential to raise resources for funding social sector schemes such as guaranteed employment under MGNREGA, the Right to Education and the proposed Right to Food Act.
Amplifying his views on the global economic environment while addressing senior officials of Indian Foreign Service separately, Mr. Mukherjee expressed “some concerns” on the strength of the post-crisis (sovereign debt crisis in Euro Zone) revival in the European economies and its impact on the developing world. For, in the case of Europe, there are still some concerns, with Greece, followed by Ireland, and now Portugal, is seeking help from the European Union and the International Monetary Fund (IMF).
In such a scenario, “major emerging market economies are experiencing robust growth, though surge in capital inflows and inflation, including from the hardening of global commodity price, is a source of worry. On the whole, 2011 should see an improvement in the world economy,” he said.