Markets & manufacturing to take growth to 5.7-5.9%

On fiscal consolidation, the report said a road map announced by the government on October 29, 2012, has considerably improved business expectations and perception of domestic and global investors, the report said.

The finance ministry expects inflation to moderate to 6.8-7.0% by March from 7.24% in November. “A further moderation in inflation, likely to commence from the fourth quarter of the current year, together with benign global commodity prices, will also facilitate softening of the monetary policy stance of RBI,” the report said, ahead of the RBI policy review on Tuesday.

Rajan acknowledged the government was worried about the large current account deficit (CAD), with exports having slowed down and imports being less elastic. CAD widened to 4.2% of GDP in 2011-12, up from 2.7% in 2010-11. The cumulative value of exports for the April-November 2012-13 period was $189.2 billion as against $201.18 billion, registering a 5.95% decline. The ministry said the diesel price hike has helped curb the CAD and asked for gold-based financial products to cut imports.

“However, given the present indications, it is expected that the trade deficit in the current year would not be significantly higher than what it was last year. Consequently, it is reasonable to expect that the current account deficit as a ratio of GDP would be lower than what it was in 2011-12,” the report said.

... contd.