India's inflation rate will ease from December but GDP growth in the current fiscal year would be less than expected due to an uncertain global economy and some local factors, finance minister Pranab Mukherjee said on Wednesday.
Bridging revenue shortfalls is a challenge in a slowing economy, but long-term fundamentals for sound growth are intact, the minister told the annual conference of economic editors here.
"The monetary policy tightening and the increase in interest rates along with the global uncertainty have not helped the industry to go in for fresh investments," he said.
"Most observers are expecting India's growth to go down to below 8%. This is disappointing, but at the same time we must not lose perspective of the global situation," Mukherjee said.
The monthly benchmark inflation, which is currently just below the double-digit figure, will start to moderate by December and could come down to 7% by the end of 2011-12, he said, but added that supply side constraints need to be addressed.
Mukherjee said though the fiscal deficit target of 4.6% of the GDP for the current fiscal was unlikely to be met the government would make "strenuous attempts" to keep it close to the projected figure. "With crude prices remaining where they are, it will be a great challenge to maintain the fiscal deficit numbers at 4.6% this year."
The government would be closely monitoring the revenue and expenditure trends to take necessary steps, he said.
On disinvestment, he said that it was too early to make any commitment on the final amount the Centre expected to get this year. He said the government was monitoring the markets and stake sales would depend on market conditions and sentiments.
He said that the proposed Direct Tax Code was expected to see the light of the day in the forthcoming budget session.