Montek Singh Ahluwalia sees rosier economy in the offing

New Delhi, Sep 21 (Calcutta Tube) With an over 4-5 percent agriculture growth likely to pep up overall GDP growth a little higher than the projected 8.5 percent and pulling down food inflation to below 6 percent, Planning Commission Deputy Chairperson Montek Singh Ahluwalia sees a rosier economy in the offing.

Ahluwalia echoed the popular perception of a good rabi harvest this year because of an excellent monsoon in an interview to Karan Thapar for CNBC TV18 programme ‘India Tonight’, telecast Tuesday.

‘I am absolutely certain that this year we are going to see more than 4 percent agricultural growth. My guess would be that we should be somewhere in the 5 percent to even 6 percent range,’ Ahluwalia told Thapar.

While terming an agriculture growth in the range of 5-6 percent as ‘not-so-phenomenal’, Ahluwalia, however, explained that it would be potent enough to pep up the overall growth beyond the targeted 8.5 percent.

‘It’s not so phenomenal if it follows a year that was weak, because 0.2 percent (of agriculture growth) followed by 6 percent means a two-year average of a little over 3 percent,’ said the plan panel deputy chief.

On chances of the country clocking a higher growth than the targeted 8.5 percent, he said: ‘If you get an agricultural growth of something like 5 percent or a little more, which is possible, that alone will add 1 percentage point to the overall growth rate of the economy.’

‘The economy grew at 7.4 percent last year. So, agriculture alone would take it up to about 8.4-8.5 percent. The rest of the system would also show some acceleration, and it could go beyond 8.5 percent,’ said Ahluwalia.

‘But we are not formally revising that right now. I think we do need to know how much the base level effect on industry is,’ he added as a word of caution.

But earlier Ahluwalia discounted fears that the base level effect, likely to manifest itself by slow down of the industrial growth, which scaled to a dizzying 13.8 percent in July 2010 from a meagre 5.8 percent in June, would hinder growth of economy to its targeted 8.5 percent.

Agreeing that ‘the base level effect is going to affect quarter-2 growth compared to quarter-1’, Ahluwalia said: ‘There will be some slowing down but we will end the year with double-digit industrial growth and that’s very good.’

‘It (the base effect) is not a cause of concern. Let’s look at it. The 8.5 percent GDP growth only requires just about double-digit growth in industry. So there is a lot of room for industrial growth to slow down and for our aggregate growth performance to be on track.’

Talking about inflation, Ahluwalia said: ‘I think all the indications are that when we get through this present phase of higher inflation in vegetables which is a result of rain and disruption and so forth, given what is happening on agriculture production, given that we don’t expect to see a bit upturn in the global economy, we should be able to get close to 6 percent in December.’

He said that food inflation may even fall below 6 percent to 5.5 percent range.

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