See FY14 GDP at 5.5%; need steep diesel price hike: Ranga

India's economy is likely to grow at around 5.5 percent this fiscal on account of strong farm output, Prime Minister's economic advisor C Rangarajan said today. "I believe the growth rate can be closer to 5.5 percent," he told reporters here.

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Agriculture growth should be 4-5 percent in the current fiscal, said Rangarajan, Chairman of the Prime Minister's Economic Advisory Council (PMEAC). The farm sector growth was 1.7 percent last year. "Even if we assume that the non-farm sector will grow at the same rate as last year, the GDP growth rate would be closer to 5.5 percent," Rangarajan said.

Last week, Prime Minister Manmohan Singh had also said that the economy will grow at about 5.5 percent. India's growth rate slowed to decade low of 5 percent during the 2012-13 fiscal because of poor performance of the manufacturing sector.

In the Economic Survey earlier this year, the government had projected economic growth to be 6.1-6.7 percent in the 2013-14 fiscal. During the April-June quarter, however, GDP growth fell to four year low of 4.4 percent, compared to 5.4 percent in the year-ago period.

Rangarajan said the county needs to address the issues that had stymied GDP expansion. "Agenda for growth can also be called agenda for reforms," he added. In order to boost growth, the government has taken a number of initiatives including the setting up of Cabinet Committee on Investments (CCI) for reviving stalled projects. Since January 1, the CCI has cleared projects worth over Rs 3 lakh crore.

Diesel price hike

Meanwhile, he also pitched for substantial increase in diesel prices to meet the fiscal deficit target. "I think the correction is very much needed. The factor responsible for this is external. The rupee has also depreciated. We need to take action. But necessary adjustment will have to be made," he said on the sidelines of an event here.

Earlier this week, diesel prices were raised by 50 paise per litre, although the under-recovery on the sale of the fuel is about Rs 12 per litre. The price was raised to Rs 51.97 per litre in Delhi.

Rangarajan said there was need to keep fiscal deficit under check. "Also for the reason that we have to keep the fiscal deficit down at the budgeted level, action will be required," he said.

Asked whether government should consider cut in planned expenditure, Rangarajan said: "I think revenues will be more or less met. What is required is to see that expenditures are maintained at budgeted level."

The government had in January allowed oil companies to raise diesel rates by up to 50 paisa per month till such time that the losses on the most consumed fuel in the country are wiped out.