Economy may grow at 8% if global environment is favourable: C Rangarajan

NEW DELHI: The Prime Minister's economic advisory panel today projected 7.5 - 8 per cent growth rate for the next fiscal and said the country can achieve a higher economic expansion if the global environment turns favourable. According to Rangarajan, excessive appreciation of the rupee versus dollar was not good.

"We might be able to achieve 8 per cent growth on our esteem ... if the world environment is favourable, we will be able to achieve high growth rate," the Chairman of the Prime Minister's Economic Advisory Council ( PMEAC), C Rangarajan, said.

While releasing the Review of Economy (2011-12), he said that the growth rate in 2011-12 is likely to be 7.1 per cent, marginally higher than 6.9 per cent projected by the Central Statistical Organisaton ( CSO).

There is a need to bring down its current account deficit to 2-2.5 per cent of gross domestic product, he added. Citing that inflationary pressures in the economy will continue, Rangarajan hoped that there won't be anymore external shocks. He also emphasised the need to pay attention to prices and adjust fuel prices to cut huge subsidy bill.

Rangarajan said that the FY13 trade deficit was seen at $184 billion and that a fiscal deficit beyond 4.6% of GDP in FY12 is a matter of concern. He highlighted the need for the FY13 Budget to be decisive with tough measures.

"Direct tax revenues are not growing as per budget estimates," he said.

Capital flows have picked up since January and Rangarajan said that FY12 capital inflows were expected at $72.9 billion.

Indian economy was growing at over nine per cent before the financial meltdown of 2008 pulled down the growth rate to 6.7 per cent in 2008-09.

The economy recorded a growth rate of 8.4 per cent in 2010-11, which according to the CSO estimates is expected to moderate to 6.7 per cent in the current fiscal.

Rangarajan further said the efforts would be needed to achieve and sustain high growth rate.

Referring to inflation, which has remained at elevated level in 2011, he said it would moderate to 6.5 per cent by March end and 5-6 per cent in the next fiscal.

While the retail inflation based on Consumer Price Index (CPI) was 7.65 per cent in January, the Wholesale Price Index (WPI) inflation was 6.55 per cent.