India may grow by 6.75% this fiscal: PMEAC

Stressing that India has been able to weather the global financial crisis, the Prime Minister's Economic Advisory Council (PMEAC) today said the country's economy may grow by 6.75% this fiscal despite bad monsoon affecting farm sector output.

The PMEAC, in its Economic Outlook for 2009-10 submitted to prime minister Manmohan Singh, said India's GDP growth rate could range between 6.25% and 6.75%. On an average, it could grow around 6.5%.

Releasing the outlook, PMEAC chairman C Rangarajan said the ongoing global financial crisis and the impact of drought on the country's farm output, forecast to post a negative growth of 2%, are key factors impacting growth. The agricultural sector accounts for about 18% of the GDP.

He, however, said India was much better poised compared to some of the other countries in the backdrop of the crisis.

"On the whole, we must say the Indian economy has weathered the international financial crisis very well. It has been able to hold on to a rate of growth of economy which is perhaps the second fastest in the world," he told reporters.

India's economic growth slowed down to 6.7% during 2008-09, from over 9% recorded in the previous three years, on account of global financial meltdown.

The PMEAC further said inflation, which is hovering around 1%, may firm up to 6% by the end of the current fiscal.

Despite the expected rise in inflation in the near future, Rangarajan said the current monetary policy may have to continue till March-end next year to support the economy, which has slowed down due to the global financial ciris.

"The monetary policy has been accommodative in the past several months...the stance will have to change, but will have to wait depending on the growth performance and inflationary pressures on the economy," he said.

Rangarajan, however, said rising inflation, mainly driven by increasing food prices, is a "disturbing element in the Indian economy". Food grain production has been estimated to be 223 mn tonnes this year, a shortfall of 11 mn tonnes from last year.

Stressing on the need to bring down the high fiscal deficit, which is projected to be 10.09%, including that of states, he said the current level is not sustainable over a long period of time.

"In 2010-11, some effort will be made to bring it (fiscal deficit) down in a measured way and the process of fiscal consolidation will have to start from next year," Rangarajan said.

The Central fiscal deficit was 6.2% in FY 09 and is projected to be 6.8% of GDP in the current fiscal.