Finance Minister Pranab Mukherjee on Wednesday said the Indian economy could grow by 7.5 to 8 per cent during the current financial year, though price rise and fiscal consolidation remained areas of concern.
"The Mid-Year Review projected a growth rate of 7.75 per cent (for 2009-10), but it would be more appropriate to say 7.5 to 8 per cent", Mukherjee said, addressing the 104th annual session of the industry chamber PHDCCI.
The Review, tabled in Parliament by him last week, had said the growth rate during the year could exceed the optimistic projection of 7.75 per cent, up from 6.7 per cent recorded during 2008-09.
The minister further said that a growth rate of 9-10 per cent, "which we have dreamt for a very long period of time is now within our reach and we have to achieve it".
Indian economy was expanding at 9 per cent before it was hit by the global financial meltdown which pulled down the growth rate to 6.7 per cent during 2008-09.
During the second quarter (July-October) of the current fiscal, the economy grew by 7.9 per cent, more than what was estimated by any analyst or think tank.
Referring to areas of concern, the minister said the short and medium term challenges before the government is to deal with price rise and increasing fiscal deficit.
Food inflation, according to recent data, shot up to a decade's high of 20 per cent and the fiscal deficit is projected to go up to 6.8 per cent in the current fiscal, more than what was prescribed in the Fiscal Responsibility and Budget Management (FRBM) Act.
The country, Mukherjee said, would need a 4 per cent growth in the agriculture sector to achieve a 9-10 per cent growth.
Following drought and floods in several parts of the country, the agriculture and allied sector growth rate in the second quarter decelerated to 0.9 per cent from 2.7 per cent in the corresponding period last year.
On the positive side, the minister said the industry was showing signs of recovery by posting over a 10 per cent growth rate in October.
Replying to a question on withdrawal of stimulus measures meant to combat the impact of the global financial meltdown, Mukherjee said, "wait till the Budget (in February)"
Referring to the Direct Tax Code, Mukherjee said there were nine areas of concern and the ministry would take inputs from various agencies, including industry chambers, before finalising the code which will replace the Income Tax Act, 1961.
The minister said the code would considerably simplify the income tax laws to the benefit of individual tax payers and corporate.
The finance ministry has already placed the draft code in the public domain, seeking opinion of all stakeholders with a view to fine-tuning the proposals.
As regards the Goods and Services Tax (GST), the minister said, "Considerable progress has been made in the roll-out plan."
The government is proposing to introduce from April 1, 2010, the GST, which will subsume various indirect taxes like excise, service tax and other levies imposed by the states.
