Economic growth rate to be 6.7%: PMEAC

Prime Minister’s economic advisory panel today pegged GDP growth for the current financial year at 6.7 per cent, painting a better picture of the economy than by other think-tanks.
It, however, added that inflation would remain high during the fiscal at 6.5-7 per cent, mainly due to poor monsoon which will pull down the agriculture growth rate to 0.5 per cent from 2.8 per cent last year.

“Economy will grow at 6.7 per cent in 2012-13,” Prime Minister’s Economic Advisory Council (PMEAC) Chairman C Rangarajan said while releasing ‘The Economic Outlook for 2012-13’. He earlier presented the report to Prime Minister Manmohan Singh.

Making a strong case for reforms, Rangarajan asked the government to open multi-brand retail to foreign investment and raise diesel prices in one or more steps to contain the subsidy bill.

He also recommended a curb on import of gold and improvement in regulatory regime to encourage investment in mutual fundsand insurance.
Reserve Bank of India (RBI) had earlier lowered its growth projection for 2012-13 to 6.5 per cent from 7.3 per cent estimated earlier.

The economic growth rate had plunged to nine-year low of 6.5 per cent in 2011-12.

Rangarajan remained optimistic about the growth prospects in the current year despite other agencies like Crisil and Moody’s projecting a growth rate of 5.5 per cent on account of global problems and deficient monsoon.

The PMEAC chief suggested host of measures like allowing FDI in multi-brand retail and a big push to infrastructure spending to accelerate economic growth.

“For channelising transfer of capital and technology, FDI in multi-brand retail up to 49 per cent may be allowed to attract investment in this sector….”, Rangarajan said.

Making a case for reforms in aviation sector, he said, the government should consider allowing foreign airlines to pick up 49 per cent FDI in domestic airlines.

In order to encourage.nvestment in infrastructure sector, he said the government should recast Cabinet Committee on Infrastructure as the Cabinet Committee for Sustainable Development of Infrastructure and make special efforts to clear high-impact infrastructure projects costing over Rs 5,000 crore.
Referring to oil sector, Rangarajan suggested “a suitable increase in the price of diesel in one or more steps, and a cap on the level of consumption of subsidised domestic LPG close to what is currently being consumed by poorer households (i.e. 4 cylinders)”.

These measures, he added, would help in containing petroleum subsidy and dealing with the rising problem of crude in the international market.

Referring to the price situation, Rangarajan said, the government needed to improve marketing and storage facilities to deal with supply-side problems.

Referring to issues concerning policy predictability, Rangarajan underlined the need for addressing apprehensions with regard to taxation issues.

“There is a need to specifically focus and address the apprehensions that have.