Finance Minister Pranab Mukherjee on Wednesday said the Indian economy could grow by 7.5 per cent in 2009-10 and cross 8 per cent in 2010-11 amid speculation that this year’s budget could set the tone for a phased withdrawal of the fiscal stimulus measures announced last year.
“The IIP (index of industrial production) figures for the month of December 2009 suggest that we may end the year 2009-10 with a GDP ( gross domestic product) growth rate of 7.5 percent and perhaps we will be able to reach 8 per cent-plus in the next fiscal,” Mukherjee said at a seminar.
The country’s industrial production grew by 16.8 per cent in December — the fastest in 20 years — reviving speculation that the government is likely to begin unwinding the stimulus measures announced last year to counter the economic downturn.
Consumer durables’ production surged by 46 per cent in December, mirroring a growing appetite for purchase of televisions and refrigerators.
The capital goods production grew by 39 per cent in December as compared to a year ago — a sign that companies are expanding factory capacities to meet rising demand for goods.
Inflation, which accelerated to 8.6 per cent in January, the highest in more than a year, remains the biggest worry for the government.
High food prices have begun cascading into higher costs for industrial inputs as the global recovery boosts commodity prices on the back of higher demand for crude oil, iron ore and coal.
“That is (rising inflation) a matter of concern, no doubt...I am afraid...8.5 per cent wholesale price index rise is disturbing,” Mukherjee told reporters on the sidelines of a seminar.
The finance minister said prices will start easing in the next few months.
“We have taken adequate measures on the supply side, which will take some time to have the pressing impact on rising prices, particularly of essential commodities. I do hope that over a period of few months, it will be possible to have a moderate rate of inflation,” Mukherjee said.