Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Tuesday that the worst is probably over for the economy and the performance would be better in the second half of the current fiscal year (FY14).
"The core sector performance does give some sign... the demand on the part of industry is not so strong, so I would say that clearly the economy has bottomed out, but we don't have strong enough signal yet of recovery. But I am hopeful that the second half of the fiscal would be better," Mr Ahluwalia told reporters at an event organised by Shiv Nadar Foundation.
The economy had grown at a decade-low rate of 5 per cent last fiscal year (FY13). Gross domestic product (GDP) grew 4.4 per cent in the first quarter of FY14, slower than a 4.8 per cent growth recorded in the quarter ended March.
Mr Ahluwalia's comments come after government data showed the core sector industries recorded an 8 per cent growth in September, the fastest pace in the past 11 months.
This pace of growth, however, is lower than the 8.3 per cent rise that was recorded in September 2012.
About the recent hike of short term lending rate by 0.25 per cent to 7.75 per cent last month by RBI, he said, "RBI has handled it (situation) very well. Whenever you are dealing with the difficult situation, you should get back to normal."
Like the Reserve Bank, Mr Ahluwalia also agreed with the proposition that India is not comfortable on the inflation front.
However, he made a case for stimulating economic growth.
GDP growth is very tepid at the moment and it is a difficult balance that the country has to strike between boosting growth and taming inflation, he said.
Supporting Kirit Parikh panel's recommendations, the Planning Commission chief said, "The issue of whether we should adjust price of petroleum products and phase out subsidy, there is no doubt (on) that. At least, the Planning Commission has been of the view that this must be done."
Recently, the panel has suggested that diesel prices should be hiked by a steep Rs 5 per litre, kerosene by Rs 4 a litre and cooking gas (LPG) rates by Rs 250 per cylinder immediately to cut fuel subsidy bill by Rs 72,000 crore.
Mr Ahluwalia said that it (price hike) cannot be done immediately. Even if it is not done immediately, the necessary action should be taken quickly, he added.
About bidding of oil and gas blocks amid policy uncertainty, he said, "It is always the case in any kind of investment where policy uncertainty was a problem...There were some restrictions (after allocation). The blocks will be rebidded excluding the area you could not allow for exploration."
"I do think that the investment will not come if energy prices are distorted. So, that is the first step we have to do. We have a lot of scope for investment domestically. We are not counting only on foreign investment."
Talking about Shiv Nadar Foundation, Finance Minister P Chidambaram today said, it's difficult to imagine an institution of this scale.
By end of this financial year, the foundation will get Rs 3,000 crore. Over the next 5 year, it will get another Rs 3,000 crore, he said.
"In fact 60-70 years ago no one thought that charity could become profitable. Today, most charity are profit. Most institutions are for profit. I have nothing against for profit organisation," he added.
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