The country?s 6.1% economy growth recorded in the first quarter of 2009-10 is likely to be lowered by the Planning Commission in the second and third quarter. However, the economy will bounce back in the last three months of the fiscal to take the annual gross domestic product (GDP) to 6.3%, Planning Commission deputy chairperson Montek Singh Ahluwalia said.

?The second quarter will be worse and may be Q3 also,? Ahluwalia said after the first meeting of the Commission in UPA?s second innings, chaired by Prime Minister Manmohan Singh, on Tuesday. ?There will be a strong recovery in the last quarter,? he added. In 2008-09, the economy grew 6.7%, way lower than 9% in the previous three years.

The annual growth projection will be lowered, if agriculture production falls by more than 2.5%. ?In the worst-case scenario of farm sector GDP declining by 6%, overall GDP growth could be limited to 5.5%,? the note prepared for the meeting stated. The country is facing the worst drought in last many years and the overall rainfall deficiency was 24.6% as on August 26. There was a loss of 6% in acreage of major crops like paddy, oilseeds, etc.

Lower foodgrain output will pull prices up and current negative rate may get into the positive territory by September or October this year, Ahluwalia said. ?It will still be modest,? he added.

The extent of price rise will depend on how the government manages drought. ?If drought is managed well and there is good rabi crop as well as fiscal consolidation, inflation may well be contained within the comfort zone,? the deputy chairman said. In its July policy review, Reserve Bank of India revised its projection for inflation at the end of March 31, 2010 to 5% from 4% earlier. The widely observed wholesale price index dropped 0.95% for the week ended August 15, the latest available. However, the consumer price inflation is in the double digits. It was 11.89% in July, higher than 9.29% a month ago.

Ahluwalia added that the fiscal deficit remains at 6.8% of the GDP for the current financial year. ?The government does not need to borrow more than the targeted amount in 2009-10,? he said. The government targets to borrow a record Rs 4,51,000 crore in 2009-10 to fund a 16-year high fiscal deficit to finance its expansionary policy, encompassing incentives to increase investments and infrastructure development.

Ahluwalia pitched for a better disinvestment policy to bridge the resource gap of Rs 1,60,000 crore for the eleventh five year development plan, which ends in March 2012. ?A bold and clear disinvestment programme is needed to meet some of these gaps in 2010-11 and 2011-12,? he said.