Economy to get back on 8 pc growth trajectory in 2 years: Plan Panel

Planning Commission Deputy Chairman Montek Singh Ahluwalia exuded confidence about India's potential, saying the economy will get back on the targeted growth trajectory of 8 per cent after two years.

"I think we can hit what we thought was our trajectory two years later because of the slowdown that we have," Ahluwalia said on Tuesday, on the sidelines of the 34th SKOCH Summit in New Delhi.

The economy expanded at a decade-low rate of 5 per cent in the first year of the 12th Plan (2012-17) period, during which the government has targeted an annual average growth rate of 8 per cent.

In the April-June quarter of the current financial year, economic growth slowed to 4.4 per cent, compared with 4.8 per cent during January-March. Growth was 5.4 per cent in the April-June period of the previous financial year.

"I believe that the long- or medium-term growth potential of the economy remains 8 per cent, provided you do all things outlined in the 12th Plan. Obviously, the first two years are not going to be at that level," Ahluwalia said.

According to Ahluwalia, the average economic growth rate in the 12th Plan period will be lower than 8 per cent and the Commission will make its estimate next year during the mid-term review of the five year policy.

Ahluwalia said he expects growth to improve in the second half of the current financial year.

"The second half of the year should be better. The first half was lower. So for the year as a whole to be better than 5 per cent, the second half has be really good. We don't know the numbers," he said.

Asked whether the slowdown is over, Ahluwalia replied: "I believe that the economy has bottomed out. The financial experts say that there will be turnaround. It is clearly not a strong rebound. But there is evidence that (there will be turnaround)."

India's exports in October grew 13.47 per cent to $27.2 billion, the fastest pace in two years, government data showed yesterday.

"The news on the exports front is very encouraging," Ahluwalia said.

He said the current account deficit will probably be lower than the target set by the Finance Minister. The deficit refers to the difference between outflows and inflows of foreign currency.

"He (the Finance Minister) himself said that instead of $70 billion, it would be $60 billion... The important news is that it would be much lower than $88 billion last year. That means we need less money. That should increase the assessment of micro-economic stability," he added.

Govt will get over negativity, says Chidambaram

Finance Minister P Chidambaram has conceded that a potent mix of factors like slowdown of economic growth, dysfunction of the executive and corruption allegations has brought in a "high degree of negativity" but expressed confidence that the government would get over it.

"In the second five years of UPA, yes, there is, I can sense, I can see that the voter is at the moment negative. I can see that. I am blind if I don't see that. The reason is slowdown in economic growth , dysfunction of the executive, the cases of allegations of corruption, investigations that are going on, inflation and a slowdown in job creation. I think it is a potent and powerful mix, a potent mix of factors which has brought in a high degree of negativity. It is possible we may get over it."

"It is possible we don't get over it. It is a verdict we have to leave to the people. We have to accept whatever the verdict people will give," Chidambaram said at the "Thinkfest" event in Bambolim near Panaji.

Even in this slowdown in the last nine years, the country has clocked an average of 7.5 per cent growth.

"It is sad that at the end of the 10-year term, the growth has seen slowdown for a couple of years after having been high in the middle years and low in the last two years. I am doing my best. I will continue to do my best to see that there is an upturn before we go to polls," he said.

Chidambaram was replying to a question whether at the end of the second UPA term in the context of global pressures, CAG reports and high optimism in which the coalition was voted to power in 2009, there was today a lack of credibility for the government and that the prime minister was singularly lacking in leadership.

He shot back saying that he cannot remain in government and comment on the prime minister.

"That is not correct, that is not appropriate. I won't do it. He is the prime minister. I am a minister in his Cabinet. I have to accept his leadership and respect him. I am sorry, I cannot answer this question."

Govt must take steps to reverse slowdown in economic growth: India Inc

As the economic growth in the June quarter dipped to a four year low of 4.4 per cent, India Inc on Friday sought immediate steps from the government to reverse the slowdown.

Manufacturing sector also posted a contraction of 1.2 per cent in the first quarter of this fiscal as against a decline of one cent in output in the same period of 2012-13.

"The GDP figures for first quarter clearly show that the economy continues to be in the throes of a slowdown. The concern becomes more acute when we see that at the present moment, there are no clear indications that the economy has bottomed out," CII Director General Chandrajit Banerjee said.

There are no visible signs of investment pick up as investor sentiments continue to be very low. A weak rupee, tight liquidity, high cost of funds, procedural delays, etc, are all coming in the way of an investment revival, he added.

Contraction in manufacturing and mining sector pulled down the economic growth in the April-June quarter of this fiscal to 4.4 per cent-- the lowest in past several years.

"The economy continues to tread in difficult waters as many challenges remain on the fore. Understandably, there is no perfect recipe to steer out of the current state of affairs but what we need is swift action given the volatile situation," Ficci President Naina Lal Kidwai said.

"The industry fears that in case urgent steps are not taken to revive the manufacturing sector, jobs will be at stake, Assocham Secretary General D S Rawat said.

We would have to strive harder on the reform front to give a push to the manufacturing sector, Kidwai said.

Hastening disinvestment of public sector units, ensuring coal supplies to the power sector, promoting competition in the mining sector and ensuring speedy implementing of Delhi-Mumbai Industrial Corridor (DMIC) would be seen as positive developments, Banerjee said.

A coordinated effort from the Government and the RBI is required to ensure that this vicious cycle is broken, he said.

Meanwhile, PHD chamber of commerce and industry urged the RBI to cut policy rates to revive the economic growth.

"Since wholesale price inflation (WPI) scenario is stabilizing at around 5 per cent during the last many months, at this juncture rate cut is inevitable to facilitate industrial production," it said.

Besides, the farm sector output expanded by just 2.7 per cent in April-June quarter this year, only marginally down from 2.9 per cent in the corresponding period of last fiscal.

However, India Inc expects a pick up in agricultural growth on the back of good monsoons.

"With monsoons being normal, a good agricultural performance coupled with rise in rural wages would help bolster rural demand," Banerjee said.

Several other sectors including construction, power generation, hotel and transport showed marked deceleration in growth.