India's gross domestic product (GDP) is set to grow at 6.4% in 2013-14, the Prime Minister's Economic Advisory Council (PMEAC) said in a forecast on Tuesday, signalling a swift turnaround in Asia's third largest economy from decade-low of 5% in the last fiscal year. With inflation coming down more than expected, the mood has shifted.
"I believe we have reached the bottom, the economy will now continue to grow at a faster rate," Rangarajan told reporters after unveiling the review of the economy for 2012-13.
"The very high level of investment rate that we have even now gives us the hope that if we take action for speedy implementation of projects we can achieve the higher rate of growth quickly even in the short term," he said.
The latest projections will likely bring cheer for the United Progressive Alliance (UPA) government caught in a tug-of-war between rising prices, sliding growth and plunging political image amid a string of corruption allegations.
India's wholesale prices-based inflation fell to 5.96% March-the lowest in three years-triggering expectations that the Reserve Bank of India (RBI) will slash interest rates in its monetary policy review next month.
The RBI is widely expected to cut lending rates in review meeting on May 3 as policymakers seek to revive high growth in the economy after it hit a decade's low in the backdrop of a global financial crisis and a stagnation in exports that also resulted in a high current account deficit.
"I would say that decline in WPI is higher than what was expected. It gives greater space for monetary authority to act," Rangarajan said.
India's factory output crawled at 0.6% in February as farms were producing less, but there were signs that the worst might be over.
Exports, battered by drying shipment orders for the most part of the last one year, grew by 6.97% in March - the third successive monthly growth.
India's current account deficit (CAD) has soared to a record of 6.7% of GDP. A widening CAD effectively means that India is buying more from the rest of the world.
"There is greater uncertainty with regard to gold imports ... We expect some moderation in the level of import of gold and silver imports during 2013-14 that would come down to $45 billion from $56 billion in 2012-13," Rangarajan said.