India - Turnaround by end 2009;Montek

NEW DELHI: Planning Commission Deputy Chairman Montek Singh Ahluwalia on Tuesday maintained that although there would be some slippage during the current fiscal on account of the “serious” global financial crisis and its impact on India, there was no need to alter the growth targets set for the XI Plan (2007-12).

In his interaction with journalists at the Economic Editors’ Conference here, Mr. Ahluwalia estimated that even though the Reserve Bank of India has projected the economy to grow at 7.5-8 per cent, the GDP (gross domestic product) growth rate this fiscal would be a shade lower at seven per cent as against the nine per cent achieved in 2007-08.

“We should be planning for as low as seven per cent [GDP growth in 2008-09], Mr. Ahluwalia said, while noting that with inflation sliding further from 8.9 per cent, it would provide a cushion to the apex bank to go in for softer interest rates aimed at spurring growth. “Inflation would come down further. This gives us greater flexibility in monetary policy. Infusion of liquidity would ease interest rates,” he said.

Mr. Ahluwalia asserted that the Planning Commission had never subscribed to the “decoupling theory” as far as the impact of the global meltdown is concerned. He said it was true that when global economies were in bad shape, there would be adverse effects on India. As per current assessment, he said that a turnaround would come during the middle or the end of 2009. Aiding the turnaround would be the agriculture sector, which is likely to witness a doubling of growth from two per cent to four per cent during the current fiscal, he said.

For the short-term — assuming the turnaround comes about next year — Mr. Ahluwalia said there had been a slowdown or “interruption” in private investment and, therefore, the Government had been focusing on countercyclical public investments in the infrastructure sector to drive growth. For this, the Commission, he said, was looking at ongoing projects in sectors such as roads, housing and irrigation for increase in public expenditure.

“If work [on preparing a list of such projects] begins now, they can be implemented in 2009-10. We will come with a clear picture in January,” he said, while indicating that 2009 will also be a big challenging year.

In the worst case scenario, Mr. Ahluwalia said: “If we find that global confidence is not coming back soon, I would emphasise a major thrust to public and private investment in infrastructure as also public-private partnership (PPP) projects.”

As for the XI Plan growth target, Mr. Ahluwalia said that the objective was to achieve a growth of nine per cent during the first four years and get into the 10 per cent trajectory by the terminal year (2011-12). At present, “we are not altering the growth target of the Plan and since it is not clear how long this downturn will last, we have not yet taken a view on that. This is a call we can take six months down the line,” he said.