The Indian economy will log a growth of less than 7 per cent this fiscal with 2009 turning "significantly worse" as the current economic crisis was unlikely to end soon, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Friday.
"The world is going through the worst crisis in 60 years," Ahluwalia told the national conference and annual session of the Confederation of Indian Industry (CII) at the Taj Palace Hotel in New Delhi.
"Is the problem going to end in 2009-10? I don't think so," he said. "Our latest assessment on a calendar basis is that 2009 is clearly going to be significantly worse than 2008.
"The growth rate for 2008-09 will be less than 7 per cent, certainly."
Ahluwalia said India's fiscal deficit for 2008-09 would also be significantly higher than the budgeted levels because of the stimulus packages announced by the government.
The government had budgeted the fiscal deficit at 2.5 per cent of the country's gross domestic product (GDP) when the national budget was presented last year, which was revised to 6 per cent in the interim budget last month.
"The government has also not been holding back on expenditure and we have spent on various projects like Jawaharlal Nehru National Urban Renewal Mission and have got all the spending done," Ahluwalia said.
He also asked the who's who of Indian industry assembled at the hotel's Durbar Hall to be patient, adding the impact of the stimulus packages announced by the government will begin to show from the first quarter of next fiscal.
The senior policymaker also ruled out India heading toward deflation, though the annual rate of inflation has dipped to 0.27 per cent, with economists even predicting the rate would turn negative soon.
Deflation is a sharp decline in the general price level. It is caused by factors like low money supply and curb in government, corporate and household spending. The lower demand during deflation often leads to a rise in unemployment levels.
Ahluwalia said that there was still a wide gap between the inflation rates based on the official wholesale price index and the various retail price indices. Due to this the full benefit of lower inflation was not reaching the consumers.
The Oxford educated economist, who will accompany Prime Minister Manmohan Singh to the G20 Summit in London April 2, said governments the world over had realised that the global slowdown should not be left for markets forces alone to tackle.