Growth rate could slump to 5.5 per cent: Chidambaram

Finance minister P Chidambaram today said the country's economic growth could slow to as low as 5.5 per cent this fiscal year - the slowest rate of expansion in 10 years for Asia's third largest economy.

"I'm looking forward to this year ending with 5.5 to 6 per cent growth, barring any unexpected shocks, and next year getting back to 7 per cent growth, and in 2014-15 getting back to 8 per cent growth," Chidambaram told Reuters in an interview on the sidelines of the G20 meeting in Mexico.

The last time full-year growth fell below 6 per cent was in 2002-03 when the economy expanded at 4 per cent. A slump in industrial activity combined with a poor monsoon dragged down India's performance this fiscal year. Until now, the government has estimated growth this year at around 6 per cent.

Chidambaram said India had the means to again reach its economic potential.

"In 2004-2008 we had 9 per cent plus growth. It's not as though we have not done it before," he said. "We have slowed down thanks to the world and some domestic factors, but we are absolutely confident that we will get back to the higher-growth path."

Chidambaram said he was concerned about inflation, which hit a 10-month high of 7.8 per cent in September.
 
"We must learn to live with some inflation, but inflation cannot be at an unacceptable level. Today it is at an unacceptable level," he said.
 
Chidambaram said that with a combination of monetary policy, spending cuts, and a tightening of tax collection, India could lower the deficit and foster growth.
 
"I'm confident that with determination, hard work, and some pain, we will be able to contain the fiscal deficit at 5.3 per cent," he said.
 
The revision in the fiscal deficit target will result in additional market borrowing up to the new level, he added. The government borrows via rupee-denominated bonds that foreign investors are allowed to trade.