Economy to grow at 7.5% to 8%

Economy to grow at 7.5% to 8%

Prime Minister's Economic Advisory Council Chairman C Rangarajan has projected a GDP growth rate of 7.5 per cent to 8 per cent in the 2011-12 financial year.

"Initially, the growth rate forecast for 2011-12 by the council was 8.2 per cent. The world situation is not very encouraging and it may vary between 7.5 per cent to 8 per cent," Rangarajan said here last night.

He said that India has the potential of growing at 9 per cent in a sustained way.

Rangarajan, a former governor of the RBI, said that India's savings rate has crossed 34 per cent of GDP, while the investment rate exceeds 36 per cent.

"Even with an incremental capital-output ratio of four, the Indian economy will be able to grow at 9 per cent in a sustained way," Rangarajan said at an event here.

Referring to broader macro-economic concerns, he said that the target of keeping the fiscal deficit at 4.6 per cent of the GDP for 2011-12 would be difficult.

In this context, he said that the government should take a look at its expenditure, particularly subsidies.

Over the medium-term, the government's aim would be to achieve the fiscal responsibility and budget management (FRBM) target of 3 per cent of the GDP.

SOURCE: financialtimes.com