Business says "ho-hum" to Survey's higher growth forecast

Industry remains sceptical about the growth projections made in Thursday’s pre-budget Economic Survey 2011-12, once again reminding the Finance Minister about fiscal consolidation measures and the need to lower interest rates.

Rajiv Kumar, Secretary General of the Federation of Indian Chambers of Commerce and Industry (Ficci) termed the 7.6 percent GDP growth projection for 2012-13 F(Y13) in the Survey as “very optimistic”.

[caption id=“attachment_245726” align=“alignleft” width=“380” caption=“Ficci’s Kumar was also critical of the “great emphasis” the Survey has laid on the role of global factors in slowing down economic growth. Reuters”]  [/caption]

“Ficci expects GDP growth in 2012-13 of around 7 percent. The Survey itself says that inflationary expectations are in control. This should have given the Reserve Bank a reason to cut interest rates, which it has not done. Therefore, industry is disappointed,” Kumar said.

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The Confederation of Indian Industries (CII) called for concerted action on fiscal consolidation and further policy reforms that would unlock the growth potential of Indian industry. The apex association also highlighted concerns on high interest rates, falling investment and high fiscal deficit - which have impacted industrial growth.

Ficci’s Kumar was also critical of the “great emphasis” the Survey has laid on the role of global factors in slowing down economic growth. “We, however, feel that domestic factors are more important for India’s GDP growth and global conditions play only a marginal role,” he said. Both Ficci and CII have sought accelerated reforms and much better fiscal consolidation.

Even the proposal to fix the subsidy on diesel per litre could not enthuse industry, with car makers remaining sceptical. And industry watchers also noted with concern that the Survey really gives no clear direction about enhancing foreign direct investment (FDI) flows. Some critical FDI liberalisation proposals, such as allowing foreign airlines to invest in Indian airlines, are still awaiting approval by the government.

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All eyes are on the budget on Friday, where Finance Minister Pranab Mukherjee is expected to announce some tough measures to get government finances back into shape. Till then it is fingers crossed.