The Prime Minister's Economic Advisory Council recently revised its economic outlook for 2012-13, projecting a real GDP growth rate of 6.7% against 7.5% projected at the start of the fiscal. The council's projection is still much more optimistic than those by private agencies. FE's MK Venu discusses various aspects of the PMEAC's latest report on the economy with its chairman C Rangarajan in an interview aired by Rajya Sabha TV recently.
How did you arrive at the growth estimates?
According to the Central Statistics Office (CSO), the Indian economy grew 6.5% last year. We believe that there could be some underestimation in this. When the final numbers come, there could be some increase in the growth rate for both the agriculture and industrial production for 2011-12. Nevertheless, we must accept the fact that growth has slowed down and, in 2011-12, the growth was perhaps one of the lowest in recent years.
As for 2012-13, we have looked at the projected performances in the various sectors and aggregated (them to arrive at the our estimates). Our estimate is composed of an improved performance in the industry, whereas, in agriculture, we project a growth of 0.5%. Even while predicting drought, the available data on behaviour of the monsoon indicate that we would be better off than we were in the drought year 2009, which nevertheless saw farm sector growth of 1%.
This year, the monsoon is not that bad and the actual growth rate can be better than 0.5% we have estimated. But we are also projecting a growth rate of 5.3 % for industry.
Last year it was 3.4 %. We are betting on improved performance of some sectors like mining, where we had negative growth last year as coal, iron ore and natural gas showed a decline because of various policy glitches.
Are you confident that these glitches are now being removed?
A lot more energy is being spent, for example, in increasing coal production. Therefore, the mining sector will likely report positive growth as against the negative growth last year. As far as the manufacturing sector is concerned, the first quarter numbers do not show a pick-up but we (expect momentum) coming in the second half. This is partly because of the effect of last year's low base ó manufacturing grew fast in the first half of 2011-12 and all the decline happened in second half. Against that (low) base, we should see an