FY12 economic growth seen at 7.1%: Rangarajan

India's economy could grow 7.1% this fiscal (FY12), feels C Rangarajan, economic advisor to the Prime Minister. His estimate is slightly better than the 6.9% GDP growth estimated by the state-owned Central Statistical Organisation (CSO). While admitting to the slack in manufacturing,

Rangarajan is hopeful that growth in farm output can be seen averaging at 3% against 2.5% estimated by the CSO. 

He sees the economy growing 7.5%-8% next fiscal.

Rangarajan said that headline inflation is expected to ease to 5-6%. However, current account deficit is seen at 3% of GDP.

It is hoped that eurozone will soon find a solution to the problem. Germany is more forthcoming in providing this relief. US economy is better than Europe, but overall situation will be tight. The coming year is expected to be sans any shock.

Here is a snapshot:

• Investment rate has been coming down
• Gross fixed capital formation down sharply over past 4 years
• Likely to have record food grain output this year
• Expansion of fiscal deficit an area of concern
• FY12 fiscal gap seen higher on rising subsidy bill
• Manufacturing has not been doing well
• Expect 3.9% growth in manufacturing sector
• Expect 9.4% growth in services sector in 2011-12
• Balance of payments situation has been difficult
• Capital flows have picked up since January
• Seeing increased FDI in FY12
• FY13 budget must have decisive, tough measures
• Mining sector projected to grow by 6% in FY13
• Manufacturing sector to grow by 7.5% in FY13
• Increase in veg prices due to archaic marketing arrangement
• Adjustment of diesel prices has been overdue
• Excessive appreciation of rupee vs dollar not good
• Must return to pre-crisis tax-GDP ratio