With GDP (gross domestic product) growth sliding to 7.7% in the first quarter, the Prime minister’s economic advisory council has lowered its growth expectations for the full year to 8% from the previous 8.2%, while warning that short-term inflation would stay high.
“The GDP growth rate will be close to 8% as the industry may not do as well as we thought earlier,” said PMEAC chief C Rangarajan on the sidelines of a Genome Foundation meeting in Hyderabad.
About inflation, he said, “For the next three or four months, it is likely to remain at higher levels. However, beginning January, 2012, it can show definite signs of decline and by March, it could be closer to 7%.”
Chief economic advisor Kaushik Basu has meanwhile joined the clamour for a reduction in interest rates.
“I believe that is something which ought to be considered,” Basu said in an interview to CNN-IBN. “When you have high inflation, the central bank’s standard response is to increase the interest rate... It had some impact, but not at the level which we had expected. So try something different...”