C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council, today said S&P's GDP assessment is incorrect, and that growth will pick up in the second half and will be 6.7 per cent this year.
The average rate of growth in the next six years will be 8.2 per cent, Dr Rangarajan said, speaking at an educational institution in Chennai.
Standard & Poor's has cut its India growth forecast to 5.5 per cent from 6.5 per cent, notwithstanding the series of reforms the government announced in the past two weeks.
“The lack of monsoon rains has affected India, for which agriculture still forms a substantial part of the economy. Additionally, the more cautious investor sentiment globally has seen potential investors become more critical of India's policy and infrastructure shortcomings,” the global rating agency said in a broader report on the outlook for South-East Asian economies.
Although the immediate impact of any increase in administered price is an increase in the price index, in its absence fiscal deficit will be high, which would further increase inflation, he added.
The price hike is the correct move over the medium term even with a view of keeping inflation under check, he said.
Agricultural performance will be better than earlier estimates, he said, adding that subsidies should be maintained at 2 per cent of GDP.
The current account deficit is expected to come down to 3.5 per cent from 4.5 per cent, the PMEAC chairman said.
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