PM's Eco Panel sees FY10 GDP growth at 6.5%

The Prime Minister’s Economic Advisory Council (EAC), headed by former Reserve Bank of India (RBI) governor C Rangarajan, said that it sees gross domestic product (GDP) growing by 6.5% in 2009-10 even as it warned about rising inflation and a ballooning fiscal deficit. "It is unlikely that GDP growth will be lower than 6.25%, but may reach 6.75%," the panel said in its Economic Outlook for 2009-10 report to Prime Minister Dr. Manmohan Singh. The RBI had in July forecast that India’s economy would grow by 6% in FY10, with an upward bias. The Planning Commission said in early September that it sees GDP growth at 6.3% this fiscal. The Indian economy had expanded by 6.7% in 2008-09 after three years of growing at over 9%.

The EAC expects the consolidated fiscal deficit of the Centre and the States at 10.09% for FY10 and sees inflation, imported and local, as a significant risk for the economy. Wholesale price inflation could rise to 6% by the end of March 2010, it said. "Accommodative monetary policy will continue till March 2010. The accommodative policy stance will have to change, but that will depend on the growth performance of the economy and taking into account inflationary pressures," Rangarajan said. Unless inflation breaches 6%, the monetary authorities may not take action, he said. The question of rolling back tax breaks will come up for review only early next year, Rangarajan added.