Economy to grow 6 to 6.5 pc in 2012-13: Montek

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SME Times News Bureau | 31 Jul, 2012
Indian economy is expected to grow by 6 to 6.5 percent in the current financial year and would take at least two years to reverse to 8 percent growth trajectory, Planning Commission Deputy Chairman Montek Singh Ahluwalia said Tuesday.

"Growth rate is going to be lower, in the range of 6 to 6.5 percent... If we grow at 6.5 percent, it will be a good performance," Ahluwalia told reporters in New Delhi.

He said the Indian economy is unlikely to reverse to 8 percent growth trajectory for at least two years. "Our natural growth rate is 8 percent. But it will take at least two years to reverse to that growth path," he said.

The country's gross domestic product growth slumped to nine-year low of 5.3 percent in the quarter ended March 31, 2012.

Reacting to the monetary policy announced by the Reserve Bank of India, Ahluwalia said the RBI move showed that inflation remained a concern.

He said the Planning Commission considers five to six percent inflation a comfortable level, while the central bank is even more cautious and their comfort level of inflation is four to five percent.

"Clearly, the inflation is not in comfortable level," he said.

Core inflation was recorded at 7.25 percent in June, as per the latest available data. The real worry is on food inflation, which remains in double-digit. Food inflation accelerated to 10.81 percent in June as compared to 10.74 percent in the previous month.

Ahluwalia said the RBI monetary policy would not have any big impact on investment and growth. "I don't think that investments are affected due to what happens to repo rate," he said.

In the first quarter review of the monetary policy, the RBI Tuesday kept key policy rates unchanged for the second time since June, saying lowering of rates would aggravate inflationary pressure.

Repo rate, the rate at which the RBI lends to commercial banks, remains unchanged at 8 percent, while the reverse repo rate, the rate at which the RBI borrows money from commercial bank remains steady at 7 percent.