The Planning Commission has scaled down India’s economic growth target for the 11th Five-year Plan that ends in 2013 from 9 per cent to 7.8 per cent. This follows slow recovery from the global downturn and a drought that has hit over half the country.
“It is a recognition of something that is there on the ground,” said Abheek Barua, chief economist, HDFC Bank, who expects corporate profits to fall and job creation to slow.
<b1>“There is a scope for further downward revision. It would depend on how the business cycle picks up. It is expected to revive by mid-2010,” he said.
In a note circulated for the Planning Commission meeting to be held by Prime Minister Manmohan Singh on Tuesday, the panel said the 2009-10 fiscal growth would be 6.3 per cent as against an earlier projection of 7 per cent because of an estimated fall of 2.5 per cent in agricultural contribution.
The situation could pick up if the rabi crop gets better rains in September.
India’s food stocks are safe, but the price of food commodities could go up by 12 to 15 per cent by next March, the member said. “Food prices could be under pressure if the demand-supply situation is not managed effectively,” the note states.
The crunch could lead to many sectors getting less funds from the government.
(With contributions from Sandeep Singh)