Growth of the Indian economy by 7.2 percent in the current financial year, as estimated by the Prime Minister’s Economic Advisory Council, signals at a discernable improvement in economic activity, said the PHD Chamber of Commerce and Industry on Friday.  

"The economic recovery, currently underway, is a testimony to the resilience of the Indian industry and vindicates the role of stimulus packages which were announced by the government to soften the impact of the global financial crisis," said PHD Chamber President Ashok Kajaria in a press release New Delhi.

He however added despite the recent surge in the economy, the path is still strewn with many challenges.  

"In the short to medium term, the surging inflation, high fiscal deficit etc would continue cause concern. Hence it is important that steps be taken so that growth trigger unleashed in the economy is maintained and the 7.2% GDP growth becomes a reality for the current year," he pointed out.

On stimulus measures given to the industry to combat the negative effects of the global slowdown, he viewed that it is also important to retain the stimulus packages in the forthcoming budget.  

"....the withdrawal would reverse the gains so far accrued to our industry and impede the growth momentum," Kajaria said.

The Review of the Economy 2009-10 presented by the Prime Minister’s Economic Advisory Council on Friday had predicted India's growth for the current fiscal at 7.2 percent, and later accelerating to 8.2 percent and 9 percent, respectively, over the next two years.

The PM's Council, however, added that agriculture output of the country will decline 0.2 percent this fiscal.

According to Kajaria the decline in agriculture performance has been on expected lines on account of poor monsoons and floods in some areas but, he added, that there is need to improve the conditions of Indian agriculture to address the problem of food inflation.

"This would be made possible by stepping up public investment in rural infrastructure, improve agriculture research and make the supply chain from farm to mandis more effective," he added.

The chamber chief also mentioned about a slew of other measures including priority to infrastructure and power sector reforms, disinvestment of non-strategic PSUs, effective labour reforms, and ensuring credit availability to industry, particularly the SMEs, at cost effective rates. 

There is need to ensure efficient management of public finances through prudent expenditure management by drastically reducing wasteful expenditure even while augmenting revenue by broadening the tax base and improving tax administration, he emphasised.

"It is important to develop a strong political will to implement reforms in real earnest," the PHD Chamber president added. 

Meanwhile, another industry body, the Federation of Indian Export Organisations (FIEO), commenting on the recommendation of the PM's Economic Advisory Council, viewed that while corrective measures to adjust expenditure are needed, Government needs to balance them out so that growth is not impacted.

FIEO President A Sakthivel viewed that stimulus for export sector needs to be continued since positive growth in exports in the last three months is largely due to low-base effect and importantly the country's sectors are labour-intensive.

"The traditional sectors of exports will continue to be under pressure due to moderate growth in advanced economies. Measures aimed at diversifying the export base in the form of export promotional schemes and interest subvention schemes should, therefore, continue till the global economy fully recovers from the slowdown,"  Sakthivel said.