Indian economy to grow at around 7% in FY13 – Economic Outlook FY13:

PMEAC growth outlookC Rangaran, the chairman of PMEAC (Prime Minister’s Economic Advisory Council) expects the Indian economic growth to stand at 6.5% – 7% in FY13. The presented number is in accordance with the RBI estimate of 7%. He has presented the mid-year economic outlook for FY13 and proposed the expected growth rate for various sectors for the coming fiscal.

The committee compared the previous years’ growth numbers and forecasted the expected numbers for FY13. The figures are as following:

GDP growth outlook FY13

According to Rangarajan, the CAD has been a great concern in the last fiscal which reached to a record level of 4.2% of the GDP, which was even higher than the levels of 3.1% during the pre-1991 crisis period. The factors that contributed for such a trend include the extra-ordinary imports of oil and gold. Fiscal deficit and inflation are both expected to cool-off a little.

The committee is very optimistic regarding the growth of the service sector and pegged the growth rate at the same number as in FY12. Industrial and manufacturing sectors are expected to show a growth rate of 5.3% and 4.5% respectively. Mining sector which showed contraction last fiscal due to the low production of natural gas, iron-ore and coal; is now expected to post good numbers. Still agriculture is seen as a big challenge due to weak monsoons which are deficient by 16%.

Present concerns:

According to Rangarajan some of the big concerns ahead of our growth are:

  • Reducing investment and savings rate
  • Surmounting subsidy burden

Recommendations proposed:

Rangarajan has proposed some of the actions to be taken on priority basis to support our economic growth:

  • Hike diesel rates in 1-2 stages
  • Reduce subsidy burden on the government
  • Allow 49% FDI both in multi-brand retail and aviation sector

Eventhough the PMEAC has presented the growth numbers for the FY13 but the market experts are assuming these targets as over optimistic and hard to be achieved.

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