Country had expected a growth rate of 8.1-8.5%.
By Sreekanth A Nair
India has lowered its economic growth forecast for the fiscal year 2015-2016 to 7-7.5 percent in the mid-year economic analysis presented in the parliament.
“With the reforms process gathering momentum, along with low inflation which should help in keeping a benign interest rate regime, one can expect the full year growth of real GDP to be in the range of 7 and 7.5 percent,” the report said.
Earlier, the finance ministry had forecast a growth rate of 8.1-8.5 percent. The economy has shown a 7.2 percent growth in the first half of the current fiscal year.
The revision came as a result of weak global demand and expected lower agricultural output due to a drought situation in the country caused by rain shortfall.
However, the finance ministry expressed confidence over achieving the fiscal deficit target of 3.9 percent in the current fiscal year. If the target is achieved, it will be a great accomplishment for the government as it hasn’t cut down its expenses for reaching the target.
But, the fiscal deficit target of 3.5 percent for next year will be a tough task for the government as the implementation of 7th pay commission recommendations for the central government employees and increased defense expenditure will put pressure on the finance ministry.
The retail inflation is likely to be around 6 percent as targeted by the Reserve Bank of India.
Chief Economic Advisor Arvind Subramanian said, “The economy is recovering, but it’s hard to be very definitive about the strength and breadth of the recovery for two reasons – the economy is sending a mixed signal and second, there is some uncertainty on how to interpret GDP data that have come.”