The government on Friday exuded confidence that economic growth in the current and the next quarter will be as encouraging as 8.9 per cent recorded in the previous two quarters, but said India must tackle barriers to ensure double-digit level growth."It is expected the. . .two quarters would be as encouraging, if not better... we assume that we will be able to reach 8.5-8.7 per cent of gross domestic product this year and perhaps next year will be able to reach a higher level," Finance Minister Pranab Mukherjee said at the annual general meeting of the PHD Chamber.
However, the country will have to tackle host of national and international problems to register double-digit growth on a sustainable basis, he said.
"It (double digit growth) must be on a sustainable basis and for that we shall have to ensure that the challenges that we are facing today, one on the price front, another on fiscal consolidation and third certain developments which are taking place (internationally)," he said.
Indian economy grew by 8.9 per cent in the first two quarters this fiscal.
The government's Mid-Year Analysis projects the economy to grow by up to over 9 per cent this fiscal.
If this happens, Indian economy would expand at a pace, registered during the three years before the global financial crisis hit the economy in 2008.
While India is charting a high growth path, Mukherjee said there are 'many barriers' which need to be crossed for achieving a sustainable double-digit GDP growth.
While the government is desperately trying to bring down rates of essential food items, the wholesale price based inflation for November was about 7.5 per cent.
The recent spurt in onion prices has catapulted food inflation to double-digits level during the week ended December 11.
Besides, high tomato and international oil prices could further push up the inflation.
The finance minister said the Reserve Bank's decision to inject Rs 48,000 crore (Rs 480 billion) into the system without hiking policy rates shows that the central bank is
not only fully aware of the inflationary pressures but also mindful of the requirements for higher growth.
Mukherjee exuded confidence that the government's fiscal policy and RBI's monetary actions are in tandem and will help the economy recover and achieve higher growth trajectory.
The RBI has decided to inject Rs 48,000 crore into the system by buying government securities through open market operations, as the system faces cash crunch due to high credit needs and advance tax payments.
Top 100 companies paid over Rs 25,000 crore (Rs 250 billion) of advance tax in the third quarter of this fiscal.
The RBI has, however, said that even though it is injecting liquidity into the system, it should not be interpreted as reversal of its tight monetary policy, as inflation continues to remain a major concern.
Global financial crisis had forced the government to provide stimulus to the economy, because of which its fiscal deficit widened to over 6 per cent during 2008-09 as against three per cent level, mandated by the Fiscal Responsibility and Budget Management Act.
During 2009-10 as well, the Centre's fiscal deficit widened to over 6.5 per cent.
With the economy reverting to reasonable growth, the government partially rolled back stimulus by hiking excise duty by two per cent, which would help it contain fiscal deficit to 5.5 per cent this fiscal.
Globally, there is no surety if financial crisis in Ireland will not spread to other parts of Europe. Mukherjee said such global developments have relevance to countries like India.
"Therefore, the recovery to path of reasonable growth of these developed countries are also important for the developing countries like India," he said. Europe accounts for about third of India's exports.
Image: Pranab Mukherjee
