India's economy is likely to have grown more than 7 per cent year-on-year in the April-June quarter and should expand by the same pace in the July-September quarter, Finance Minister Palaniappan Chidambaram said on Thursday.
"Except in Q2 of 2004-05 when the GDP grew by 6.7 per cent, in every other quarter of the last 10 quarters, including the quarter that will end on 30th September 2006, the growth rate has been over 7 per cent," the finance minister said.
GDP data for the April-June quarter is due on September 29. The economy grew 8.4 per cent in the fiscal year to March 2006 and the central bank expects it will expand 7.5-8.0 per cent in 2006/07.
Giving a speech on "Economic Policy Making in a Coalition Era", Chidambaram cautioned that coalition governments tend to become "somewhat liberal or populist" in their fiscal stance as elections near.
The next general election is not due until 2009 but he noted that as polls get closer the attractiveness of spending can become irresistible.
"There is a temptation to resort to higher levels of government spending and lower levels of taxation which are believed to be magnets for voters," he said.
He warned such an approach shifted the fiscal cost from the current generation to future generations.
"While more spending and lower taxes may have immediate tangible benefits, the hidden costs are not visible to the current voters."
India's fiscal deficit stood at 864.04 billion rupees in the first four months of the fiscal year, or 58.1 per cent of full year target of 1.49 trillion rupees, data showed on Thursday.
India aims to cut its fiscal deficit to 3.8 per cent of GDP in 2006/07 from 4.1 per cent the previous year.
Chidambaram noted growth in government revenues, exports, foreign exchange reserves and bank credit.
"Tax revenues have increased by an average of 20 per cent in each of the years 2004/05 and 2005/06, and are projected to increase by another 20 per cent in 2006/07," Chidambaram said.
The tax to GDP ratio was expected to rise to 11.2 per cent by March 2007 from 10.5 per cent in 2005/06, he said.