Will surprise critics again by year end: Arvind Mayaram, Economic affairs secretary

WASHINGTON DC: A day after the International Monetary Fund sharply pared India’s growth forecast for the year, the government expressed confidence that the country’s economic performance would be much better than predicted and stuck to its guns about a possible revival.

“India has generally surprised critics. I think at the end of the year you will see that we will surprise them again,” economic affairs secretary Arvind Mayaram said in the US capital. Mayaram stuck to the government and RBI’s forecast of 5%-5.5% growth in the current financial year. “The fact is that one needs to look at hard numbers. We believe and we still believe that we have in the current fiscal the potential of going beyond 5%,” Mayaram said at the launch of the $1 billion, rupee-denominated bonds by the International Finance Corporation (IFC).

India’s economy expanded at a four-year low of 4.4% in the April-June quarter, triggering a wave of downgrades, some as sharp as two percentage points. Growth last year hit a 10-year low of 5%.

IMF joined the pessimists on Tuesday, cutting India’s growth estimate to 3.8%, a 1.8 percentage point cut from its July estimate of 5.6%. IMF’s estimates are not strictly comparable with India’s official estimates because of the difference in methodology – while India’s national account numbers are based on factor cost, IMF’s estimates are based on market prices.

According to the IMF, measured at factor cost, India’s economy will grow 4.25% in 2013-14, higher than the Goldman Sachs estimate of 4% for the year and in line with most other private estimates. Mayaram sees the IFC bond offer as an important step towards the internationalisation of the Indian currency. “This is for the first time that a rupeedenominated bond is being launched in the global market,” Mayaram said, calling it an important step towards the “process of internationalization of rupee bond market.”

IFC will use the proceeds of the rupee-denominated bonds to provide rupee funds to Indian companies, but the significance of the offer goes beyond the proceeds.