Europe woes may hit exports: FM

NEW DELHI: Finance Minister Pranab Mukherjee chose to stick to his earlier growth projetion of 8.7% despite a faster-than-expected rise in industrial output. At the same time the minister warned of adverse impact of the European debt crisis on Indian exports as more than a third of the consignments go to the continent.

Addressing industry chamber Assocham's annual general meeting, the minister said that higher exports were critical for lowering the current account deficit, which is estimated to rise to 3% of the gross domestic product during the Current fiscal.

India's current account deficit more than trebled to $13.7 billion during April-June due to a steep rise in imports and payments by Indian companies for availing of services from overseas. He estimated that current account deficit could rise to around $55 billion during 2010-11 . Data for the last two months would, however, prvide some comfort to the government as exports have grown faster than imports, resulting in a lower trade deficit.

Apart from higher exports, Mukherjee said it was also essential to push for a lower fiscal deficit, which is budgeted at 5.5% of GDP in 2010-11 . “The roadmap which we have set in the Budget will be achieved,” Pranab Mukherjee said, laying emphasis on how fiscal consolidation has been on top of the government's agenda. He said fiscal deficit target of 5.5% this year, 4.1% in 2011-12 and 3% thereafter is what the government is committed to achieve.

“We have done well in recovering our growth momentum from the impact of the unprecedented global financial crisis and other external shocks over the last two years,” the FM said, adding that the economy has become remarkably resilient to both external and domestic shocks and that the stimulus packages announced in the past had actually helped.

Cautious Approach

Pranab Mukherjee said that higher exports were critical for lowering the current account deficit, which is estimated to rise to 3% of the GDP during the current fiscal Moreover, FM warned of the adverse impact of the European debt crisis on Indian exports as more than a third of the consignments go to the continent Mukherjee also emphasized the need for a lower fiscal deficit, which is budgeted at 5.5% of GDP in 2010-11