INDIA’S top economic advisor cut on Friday (September 13) his growth forecast for this year to 5.3 per cent, just above last year’s decade-low expansion, but insisted global ratings agencies had no reason to downgrade the country.
The new forecast, while down from a previous 6.4 per cent projection, is broadly in line with central bank expectations but still higher than some private economists who say growth could be as low as 3.7 per cent.
The projected growth for the financial year 2013-14 is “still a very respectable” level in the current global context, said C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council.
The forecast comes as policymakers struggle to stabilise the Indian currency, which has fallen some 14 per cent against the dollar this year, hit by weak growth and a record current account deficit – the broadest measure of trade.
Rangarajan said it was imperative the central bank maintain its tight monetary policy until the rupee stabilises. The rupee now is off historic lows hit last month, lifted by a spate of measures to support the currency.
He said the Congress-led government, accused of policy paralysis during most of its second term, had undertaken a string of reforms in the past year, opening up India to wider foreign investment.
“The rating agencies have been talking about the reforms being put on the backburner.
That’s no longer true. Much important legislation has been passed,” he told a news conference.
Standard & Poor’s, which has maintained a negative ratings outlook for India, has said there is a one-third chance of a downgrade.
Rangarajan said he believed the government would meet its fiscal deficit target of 4.8 per cent of gross domestic product this year, although it would be a “challenge”.
