Listing fiscal and current account deficits as challenges facing the economy, Prime Minister's key advisor today lowered the growth forecast for the current fiscal to 5.3 per cent from 6.4 per cent projected earlier and suggested oil subsidy reduction to keep public finances under check.
Releasing the Economic Outlook for 2013-14, PM's Economic Advisory Council (PMEAC) Chairman C Rangarajan listed host of measures like easier FDI norms, increasing coal output and stable tax regime to boost growth in medium to long term.
"The council is looking at a rate of economic growth of 5.3 per cent in 2013-14, lower than that indicated (6.4 per cent) in its April 2013 review," it said, adding that currency related disruptions has impacted the momentum of recovery.
RBI too had earlier lowered its growth projection for this fiscal to 5.5 per cent from 5.7 per cent. The GDP grew by 5 per cent in 2012-13.
Terming high Current Account Deficit (CAD) as the "main concern at present", Rangarajan said it was expected to come down to USD 70 billion or 3.8 per cent of GDP in 2013-14, from USD 88.2 billion or 4.8 per cent a year ago.
However, he added that in view of the likely decline in net capital inflows, India will have to draw down its reserves by around USD 9 billion to bridge the CAD.
On the government's resolve to lower fiscal deficit to 4.8 per cent of GDP in 2013-14, Rangarajan said "containing (it) within the budgeted estimate could be a challenge" and suggested expenditure compression to stick to the target.
"Discretionary expenditure budgeted may need to be compressed, and subsidies restructured, in the remaining months of the financial year in a growth friendly manner to limit fiscal slippages," Rangarajan said.
The PMEAC expects the agriculture and industry to grow by 4.8 per cent and 2.7 per cent respectively. The growth of services sector is pegged lower at 6.6 per cent in current fiscal.
Noting that the government's fiscal deficit in first four months has reached 63 per cent, Rangarajan said there is a need to have adjustment in domestic prices of petroleum products to contain expenditure.
"All that required is to have adjustment in the domestic prices (of petroleum products),"