PMEAC cuts FY13 GDP forecast to 6.7%, fisc deficit at 5.06%

The Indian economy is likely to grow at 6.7% in the current fiscal year, C Rangarajan, chairman of the PM's economic advisory council told reporters during the mid-year economic outlook on Friday.

The government's Economic Survey had pegged GDP growth for fiscal year 2013 at 7.6%. Two days ago, the Centre for Monitoring Indian Economy (CMIE) had also scaled down FY13 GDP growth forecast to 6.7% on poor monsoon.
Rangarajan, who is also a former RBI governor, said fiscal deficit is likely to be 5.06% of the GDP, while current account deficit is expected to be 3.6% of the GDP.
In recent years the advisory panel has been optimistic about India's economic performance, and the revised forecasts are higher than estimates by private economists who now expect growth closer to 5.5% for 2012-13. The economic growth for FY12 may be higher than 6.5%, Rangarajan said.
India's economy has lost momentum due to global headwinds, sluggish policymaking, high interest rates and worries about a drought in parts of the country that may suppress investment and demand. "The economic growth for FY12 may be higher than 6.5%," Rangarajan said.
Rangarajan said FY13-end inflation figure is expected to be 6.5-7%. The food inflation is expected to remain high in the coming months, he said.
Wholesale inflation unexpectedly fell in July to a near three-year low but economists doubt the drop will be enough to persuade the RBI to cut interest rates at its September meeting to try to revive the struggling economy.
He reemphasised the need to increase diesel prices in one or two phases. "We need to address the perception of arbitrary actions on tax," he told reporters.
Rangarajan said managing fiscal deficit can be managed only if targeted subsidy cuts get carried out. He sees a case for a correction in diesel prices. Also, he said, there is a need to make IT exports more competitive.
He expects the deficient monsoon to pull down farm sector growth rate to 0.5% in 2012-13.
Besides that, Rangarajan pegged manufacturing, mining and electricity growth at 0.5%, 4.5%, 4.4% and 8%, respectively for FY13. With inputs from agencies.