India can achieve 8.2% growth in 12th Plan, says ADB

GURGAON: India can achieve 8.2 per cent growth rate in the 12th Five Year Plan (2012-17) as envisaged by the Planning Commission, provided steps were taken to address issues like inflation and fiscal consolidation, said an Asian Development Bank (ADB) official.

"(Economic growth of) 5.6 or 6.7 is not a bad number. But, India's potential is certainly higher and therefore, the 12th Five Year Plan Approach Paper's projection of average 8.2 per cent is achievable, if the issues like reforms, fiscal consolidation plan, investment pipeline addressed," ADB's Managing Director General Rajat Nag told reporters.

The Manila-based ADB has recently lowered its projection for India's economic growth for the current fiscal at 5.6 per cent from 7 per cent earlier.

The growth rate, Nag hoped, would improve to 6.7 per cent in the next fiscal.

The average annual growth rate in the 11th Plan (2007-12) has been estimated at 7.9 per cent.

Hailing recent reforms initiatives, Nag said it reflected the political commitment to carry forward the process.

"I must say that the reforms announced in September are certainly appropriate and fairly comprehensive - FDI, aviation. I think all of them are very positive and in the right direction. To me the most important add-on is the evidence of strong political commitment by the major parties to these initiatives. Having said that, I feel the key would be implementation," he said.

The implementation of these reforms, he added, would provide necessary impetus to the growth.

As regards the risks, Nag said, "the external situation remains the same. European crisis... while we do expect it to be resolved, it is not going to be easy. We are forecasting the Eurozone to contract in this year to -0.6 per cent and increase slightly next year. The US economy is likely to expand to about 1.9 per cent this year and 2.1 per cent next year. So, external environment will remain muted," he said.

However, he added, the high rate of inflation, mainly because of delayed monsoon, would continue to haunt India in the current fiscal.

"Inflationary pressures will remain high and we are forecasting average inflation 8.2 per cent, moderating to 7 per cent in fiscal 2013. So the headwinds because of inflation, headwinds because of external pressures and the fiscal situation are obviously matters of concern," Nag said.

Noting that fiscal management plan of the government is encouraging, he said, things would depend upon implementation.

India, he suggested, would need to speed up the process of decision-making and clear infrastructure projects fats.

"If investment pipeline speeds up and backlog of projects are cleared, then I think India can essentially get back to its growth path. So this 5.6, going to 6.7 per cent, certainly go up next year", Nag added.