India's economic growth is expected to turn around in about six months, said Montek Singh Ahluwalia, deputy chairman of the Planning Commission. "We can bring GDP back to 9% by the end of 12th Plan," he told reporters at a banking conference on Monday.
India's finance minister P Chidambaram called on Saturday for the country's central bank to take "calibrated risks" to support the struggling economy as a reciprocal measure to the government's fiscal efforts, and said the country's growth has bottomed out. Ahluwalia sees current account gap close to 3% of the GDP over the next five years. He says the current account gap is high as imports remain strong.
However, he expects gold imports to fall to "normal levels". He sees India April-September GDP at 5.5% and October-March growth at 6%. "The economic deceleration has been arrested," said Ahluwalia.
India's industrial output rose modestly in August, but not enough to end a long slump in Asia's third-largest economy, while inflation slowed, improving the case for a cut in interest rates that both businessmen and politicians have been pleading for.
Ahluwalia says the major supply constraint for growth is infrastructure bottlenecks. He believes India can support 8.2 percent growth if it can finance current account deficit at 3 percent of the GDP.
India's current account deficit fell to USD 16.55 billion in the June quarter, down from an all-time high of USD 21.76 billion in the March quarter, and also below the USD 17.54 billion deficit posted in the June quarter last year.
