The UPA government expects the Indian economy to grow by 7 per cent in 2009-10. If it achieves this in the backdrop of a global meltdown, India would be among the hottest growth economies in 2009-10, perhaps next only to China.
“The domestic situation is turning for the better. The global situation is also improving. If the external sector improves, we can achieve a growth rate of 8 per cent,” finance secretary Ashok Chawla said at the customary post budget press meet on Monday. This optimistic outlook despite the fact that the Economic Survey has projected a gross domestic product (GDP) growth rate of about 7 per cent.
The government, which expects the inflation level to fall further for some time, is likely to clock 2-4 per cent by the end of the current fiscal.
“There is the overarching challenge of getting back on a high growth target,” Chawla said, adding that increased public spending would work as an automatic stabiliser.
But fiscal deficit remains a challenge.
The fiscal deficit as a percentage of GDP is projected at 6.8 per cent compared to 6.2 per cent as per provisional accounts of 2008-09. “This level of deficit is a matter of concern and the government will address this issue in right earnest to return to the path of fiscal consolidation at the earliest,” finance minister Pranab Mukherjee said.
The fiscal deficit target for 2010-11 is 5.5 per cent while for 2011-12 is 4 per cent, Chawla said.
Revenue secretary PV Bhide, also present at the media briefing, said that the abolition of the Fringe Benefit Tax (FBT) and Commodity Transaction Tax (CTT) would result in a loss of Rs 10,000 crore, largely on account of the scrapping of FBT. The withdrawal of CTT would lead to no loss as it was not operational, Bhide said, adding that on the indirect tax front, the estimated loss stands at about Rs 30,000 crore.