New Delhi: Improvement in performance of agriculture and manufacturing sectors is expected to push the economic growth rate to 6.4 per cent in 2013-14 from 5 per cent in the previous fiscal, PM's economic advisory panel said on Tuesday . "Economy will grow at higher rate from now. We projected growth rate of 6.4 per cent in the current fiscal", Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said while releasing the Economic Review for 2012-13.
Economic growth rate had slipped to decade's low of 5 per cent in 2012-13 mainly on account of the impact of the global financial woes. Rangarajan hoped that the GDP estimate for 2012-13 would be revised upwards from 5 per cent estimated in February by the Central Statistical Organisation (CSO).
The improvement in the growth rate in the current fiscal, he said, would mainly be on account of better performance of agriculture, industry and services sectors. The agriculture sector, he said, was likely to grow at 3.5 per cent compared to 1.8 per cent in the previous fiscal.
The panel said the economy probably grew 5 per cent in the fiscal year 2012/13, its slowest pace in a decade.
In case of industry and services sectors, the growth rates have been projected at 4.9 per cent (3.1 per cent in 2012-13) and 7.7 per cent (6.6 per cent), respectively. Rangarajan said the action taken by the government to speed up project clearances since September would be visible in the current fiscal.
On the spiralling current account deficit (CAD), Rangarajan said it is likely to come down to 4.7 per cent of the GDP in 2013-14 from about 5.1 per cent in the previous fiscal. The CAD, which is the difference between inflow and outflow of foreign exchange, shot up to an historic high of 6.7 per cent of the GDP for the quarter ended December 2012.
Observing that controlling CAD remains government's main concern, Rangarajan said, "it is also vitally necessary to encourage exports of both merchandise and services". He hoped that with inflation coming down, peoples' appetite for gold, the import of which along with petroleum products had added to the pressure on CAD, will also diminish.
The government, he said, would have to maintain an attractive return in financial assets for bringing down the demand of gold. Also, "price and subsidy reforms in petroleum products need to be completed to control our oil import bill".
On the price situation, PMEAC said inflation continues to remain high, but there are definite signs that wholesale price index (WPI) based inflation is coming down. It has pegged the inflation at around 6 per cent in 2013-14. The provisional figure for inflation at the end of 2012-13 is 5.96 per cent.
"Non-food manufacturing inflation remains around the comfort zone. As inflation comes down, it will create more space for monetary policy to support growth," said the Prime Minister's economic adviser. He further said policy and administrative actions such as the recently constituted Cabinet Committee on Investment can help overcome obstacles in the speedy execution of projects.
"While even existing rates of investment should enable us to grow at 7.5 to 8 per cent over the short term, a return to higher levels of savings and investment can take us back to the very high levels of growth which we had seen earlier," he said. Rangarajan said if India grows at 8-9 per cent per annum, "we will graduate to the level of a middle income country by 2025".
The PMEAC has projected higher inbound FDI at $36 billion during 2013-14. The net FDI inflow in 2012-13 was $18 billion (USD 26 bn inbound and USD 8 bn outbound). "Outbound FDI is also expected to increase, resulting in net FDI inflow of USD 24 billion (this fiscal)," PMEAC said.