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India can achieve 7.4% growth: Plan panel
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April 03, 2009 19:37 IST

India can achieve a growth rate of 7.4 per cent in the current fiscal if measures in addition to stimulus packages are taken, the Planning Commission has said in a report, even as other international agencies have lowered the rate of fiscal expansion for India.

"If a major effort (in addition to stimulus packages) to further increase public investment in construction can be mounted, we can have a higher growth rate. . . A Rs 50,000-crore (Rs 500-billion) absorption, i.e. one per cent of GDP can, raise the growth rate by up to 2.2 per centage point," a Planning Commission report submitted to the Prime Minister Manmohan Singh said.

Stating if even half of this figure is realised, growth rate for 2009-10 could be 7.4 per cent, it added, "modelled as an increase in construction demand by the government financed through foreign inflows or reserve depletion, it gives a big boost to GDP as it increases employment."

The economy, otherwise, is likely to expand by 6.3 per cent in the current fiscal, aided by stimulus packages and United Progressive Alliance's flagship programme National Rural Employment Guarantee Scheme, the report said.

Under the present circumstances, it stated, "These (stimulus measures by the government) can raise the growth rate by 1.6 percentage points to 6.3 per cent." 

On the measures taken by the government so far, the report said liquidity have increased and improved credit flow, stimulated demand through increased government expenditure on various programmes and cut in tax rates and promoted exports.

The report, prepared by Commission member Kirit Parikh views the measures announced in the interim budget as increase in public consumption and public investment.

Hit by global financial meltdown, the Indian economy, which was projected to grow at 9 per cent, would witness a reduction of 4.3 per centage point in the growth rate, it said.

The reduction was calculated mainly on account of 18 per cent decrease in real export volume. This could reduce the growth rate by 2.7 per cent, the Commission report said and pointed out that another 1.2 per cent reduction could take place on account of decrease in foreign inflow by 20 per cent.

Also, a one per cent reduction was projected due to fall in private investment by 10 per centage points which is equivalent to three per cent of the GDP.

Fall in crude prices by $20 could improve the GDP by 0.6 per cent.

"Since the impact multipliers are larger and should be considered as outer bounds, the minimum growth rate that can be expected when the world GDP growth falls to -0.6 per cent and without any counter measures by the Government should be 4.7 per cent," the report said.

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