Economy to grow at 8.5% to 8.75% in FY11, says Pranab

The country?s economy is on track to grow 8.5% to 8.75% in the current fiscal ending March 31, 2011, finance minister Pranab Mukherjee said on Tuesday. The economy grew 8.8% in the June quarter, the fastest since December 2007.

Agreeing on the same line, Prime Minister?s Economic Advisory Council chairman C Rangarajan said economic growth at 8.8% in April-June was on expected lines but lower industrial output in the second quarter may pull down overall gross domestic product growth in July-September.

?It (April-June GDP) is in line with overall growth projections of 8.5% for 2010-11 (April-March)…I expect agriculture to do better in the third quarter,? Rangarajan said.

Farm sector grew only 2.8% in April-June.

Rangarajan said industrial growth was likely to slow down in the second quarter of this fiscal year, pulling down overall GDP growth in July-September.

However, both industrial and agricultural growth are expected to pick up in the third quarter, he said.

This will ensure the economy clocks 8.5% GDP growth in 2010-11, he said.

RBI should calibrate monetary steps and should not ?loosen? its stance even if the country?s economic growth moderates in coming quarters from 8.8% in April-June, Planning Commission deputy chairman Montek Singh Ahluwalia said.

Manufacturing growth may slow in the next few months but agricultural growth will pick up in coming quarters and help overall economy clock 8.5% or higher growth in 2010-11 (April-March), Ahluwalia told reporters.

GDP growth was 8.6% in the previous January-March quarter and 6% in the same period a year ago, government data showed.

?It is certainly true that with growth being high, there is no particular need to loosen monetary policy stance from growth point of view,? Ahluwalia said.

He, however, said it is up to the central bank to decide on its stance.

?RBI?s objective should be to calibrate its policy stance,? he said when asked if scorching economic expansion warranted aggressive monetary tightening at the central bank?s September 16 policy review.

RBI last raised repo rate by 25 bps and reverse repo rate 50 bps in its July 27 policy review.

In 2010, the central bank hiked repo rate 100 bps, reverse repo rate 125 bps and cash reserve ratio 100 bps to anchor inflationary expectations and mop up excess liquidity.

Admitting that current high inflation was ?not acceptable?, Ahluwalia said headline inflation may fall to around 6% by December end from close to 10% in July.

He also said food inflation is expected to cool further from 10% in the second week of August.

Meanwhile, Planning Commission principal advisor Pranob Sen said he had expected first quarter GDP growth to be better than 8.8%. He said he is yet to analyse the data to find out why it was below expectation.