NEW DELHI: The Indian economy could grow at a faster pace in 2009/10 compared with the previous year although inflation and high fiscal deficit are major challenges for the government, the finance minister said on Wednesday.
Surging food prices and faster industrial growth have pushed up headline inflation, putting pressure on authorities to take steps such as importing food items and raising the cash reserve ratio for banks and interest rates to check inflation. The outlook for economic growth during the December and March quarters looked better than previous quarters, Finance Minister Pranab Mukherjee said, adding the economy could expand around 7.75 percent for the full fiscal year that ends in March 2010.
“It would be more appropriate to say that it (growth) would be around 7.5 to 8 percent,” Mukherjee told an industry conference.
Speaking at the same conference later in the day, the deputy chairman of country’s Planning Commission, Montek Singh Ahluwalia, said the economy was well positioned to expand 8 percent in the 2010/11 fiscal year.
The economy expanded 6.7 percent in 2008/09, slower than 9 percent or more in the previous three years.
Bond yields were little changed, but the benchmark share index ended up 3.23 percent at 17,231.11 points as investors placed bets on long-term economic outlook of the country, while firm global markets underpinned sentiment.
While worries on economic recovery may be over, policymakers are now concerned over inflation driven by rising food prices.