PMEAC sees 6.4% growth in 2013-14, urges more reforms.

NEW DELHI: The economy is expected to grow 6.4% in the current fiscal powered by an improvement in the farm, industry and services sectors but sustained reforms in critical areas is needed to accelerate expansion, a top advisory body said on Tuesday.

The Economic Advisory Council to the Prime Minister, headed by former Reserve Bank of India governor C Rangarajan, also said controlling the current account deficit (CAD) remains the main concern now although he estimated it to narrow to 4.7% of gross domestic product in 2013-14 compared with 5.1% of GDP in the previous year.

"I believe we have reached the bottom, the economy will now continue to grow at a faster rate," Rangarajan told a news conference while releasing a review of the economy.

"The very high level of investment rate that we have even now gives us the hope that if we take action for speedy implementation of projects we can achieve the higher rate of growth quickly even in the short term," he said.

Rangarajan's growth estimate is nearly in line with the government's forecast of 6.1% to 6.7% growth in 2013-14. Growth is estimated to have slowed to a decade low of 5% in 2012-13 due to the impact of the global economic slowdown, high interest rates and policy delays. But Rangarajn said the reform measures begun in the second half of last year and the union budget have improved the situation and strengthened expectations.

But he cautioned that much ground still remains to be covered. "A judicious mix of policy and administrative measures can have a positive impact on these important parameters," he said but added that some political uncertainty due to the parliamentary elections scheduled for April-May 2014 may have impact on investment behaviour.

"However, significant improvement from the current very low levels of economic growth is certainly feasible," Rangarajan said in his report. The PMEAC said inflation continues to remain high but there are definite signs that the headline WPI inflation is coming down.

"As inflation comes down, it will create more space for monetary policy to support growth," the report said estimating that inflation in 2013-14 would be around 6%.

The report said the government has shown its determination to contain the fiscal deficit but the current account deficit remains a concern." While in the short run, we should take such actions that are necessary to encourage capital flows, over the medium term, we need to bring down the current account deficit to moderate levels," the report said.

The council also identified vital reforms needed to sustain high growth. It called for speedy project clearances, reducing the current account deficit, managing the capital account, improving net energy availability, containing inflation, reforms in agricultural marketing and supply chains, more attractive saving products.

It said while the setting up of the cabinet committee on investment has helped in speeding up project clearances, more needs to be done in the coming months to enable new investment to kick off.

"In the current context, achieving the production and capacity creation targets in the key infrastructure sectors such as coal, power, roads, railways and ports, which are largely in the public sector or on public-private partnership domain, will act as a great stimulus to private investment and faster growth," the report added.


Source : timesofindia.indiatimes.com