An ASSOCHAM report said that the quality of governance, inflation and the government’s fiscal situation will remain the key differentiators in 2013 between India managing to cope up with the global slowdown and further erosion in the economic growth.
The report based on inputs from economists and industry leaders, does not see turnaround in the economy in the short term, as uncertainty in the US and Europe has only increased denting the investor confidence worldwide.
While the ASSOCHAM report on the 2013 economic situation does not see India’s growth exceeding six per cent in the current fiscal, it may not exceed 6.2% to 6.5% even in the FY14.
It said that despite some optimistic views on the downslide having bottomed out, Indian economy is still grappling with the key problems of high inflation and high interest rates, lack of investor confidence and a terrible situation for exporters.
Mr Rajkumar Dhoot president of ASSOCHAM said that “Under these circumstances, it is the quality of governance and the political leadership which only can make a big difference.”
The report lists the limitations of the government to do any pump prime to boost the consumer demand in terms of reducing taxes on individuals or the industry. The fiscal situation is almost on the precipice leaving little room for the Finance Mr P Chidambaram to revive the industrial and consumer demand in the coming budget.
It added that while the Reserve Bank had given an indication of interest rates cut later this month, reining in inflation will continue a priority for the central bank, however much the industry demands for the rate cut. We do not see rate of more than 100 basis points in 2013.
With the fiscal deficit crossing 80% of the budgeted for the entire year in the first eight months of the current financial year and the current account deficit widening to 5.4% of the GDP in July to September quarter, signals about the state of government finances are not quite comforting.
However, the situation will only improve in the medium to long term as the savings and investments, still stay above 30% of the Gross Domestic Product.
Source - ASSOCHAM
