Rajan moots 3-prong strategy to boost growth

Chief economic advisor to the finance ministry Raghuram Rajan on Monday suggested a three-pronged strategy, including a confidence-inducing Budget, to push growth, which he estimated would decline to 5.7-5.9 per cent in the current fiscal.

"We cannot be satisfied with this (5.7-5.9 per cent) rate of growth. So, we are not at the end of set of steps we need to take ... we are at the end of the beginning. Further steps include a good confidence inducing budget, speeding up clearance for projects, and further steps in capital market reform," Rajan told newspersons after tabling the finance ministry's mid-year economic analysis in Parliament.

The mid-year analysis lowered the growth projection for the current financial year to 5.7-5.9 per cent from 7.6 per cent estimated earlier. Economic growth had fallen to a nine-year low of 6.5 per cent in 2011-12, and is slated to slump further.
 
Rajan said GDP growth was likely to show an improvement in the second half of the 2012-13 fiscal to around 6 per cent from 5.4 per cent in the first half (April-September), driven by factors like improved business confidence, better corporate profits, better industrial output numbers and moderating inflation.

"Strengthening the financial infrastructure is important. Improving the corporate bond market is also what we need to do. ''We need to take a number of measures. Improving the vibrancy of equity market, and the ability of the equity market to finance infrastructure projects need to looked into," he said.

On tax collection, Rajan said low corporate profitability is impacting revenue realisation.

"Corporate profit earnings are not growing at the pace they were growing in past. We hope it will start picking up once again and that should add buoyancy. If people are not making money as much as they were then clearly it is going to impinge on that kind of revenue," he said.