Mumbai: The Finance Minister on Tuesday presented India's first Mid-year economic review to Parliament. Jaswant Singh said that the economy would register a 5.5 per cent growth despite the bad monsoons and tensions in West Asia.

Mr Singh labeled the fiscal deficit of the Central Government as a "major area of concern" and hinted that the situation could deteriorate in the remaining period of the current fiscal year unless corrective measures were initiated. However, he projected an economic growth of 5-5.5 per cent for the current year, in line with the Reserve Bank's projection

In April-June, the gross domestic product (GDP) grew by six per cent, a rate markedly higher than the 3.5 per cent registered in the corresponding period the previous year. The estimates of growth at the beginning of the fiscal year were between six and 6.5 per cent.

The review said that in April-September, industrial production grew by 5.2 per cent compared with 2.4 per cent in the corresponding previous period, with the turnaround in the capital goods sector being particularly striking. "Taken together with the higher growth in the manufacturing sector in the current year, the trends underline a distinct revival in industrial activity," the review said.

The fiscal deficit for the first half of the current year, at Rs 57,746 crore, was only marginally higher than the deficit in the corresponding period the previous year. Revenue receipts increased by 15.9 per cent while total receipts increased by 12 per cent. In the same period (first six months), the aggregate revenue expenditure and capital expenditure increased by 13.5 per cent and 3.6 per cent.

The main highlights of the review was:

• Economy projected to grow between 5 and 5.5 per cent.
  
• Foreign exchange reserves over $66 billion.
  
• Industrial production up 5.2 per cent in the first half.
  
• Agricultural and allied sector growth 4.4 per cent in the first quarter.
  
• Inflation point-to-point at 3.3 per cent in the first half.
  
• Exports up by 13.5 per cent, imports by 8.5 per cent in the first half.
  
• Revenue receipts up by 15.9 per cent in the first half

"Prospects for the current year appear brighter than the initial, rather subdued, estimates that followed in the aftermath of a seriously deficient monsoon," the review said.

The review mentioned that "the negative sentiment witnessed towards the end of August, subsequent to poor monsoon, has since waned".

The reasons for this are the several "positive developments" in the economy, particularly the success in containing prices, which, in the past, have generally tended to spiral rapidly after monsoon failures. But this time, the inflation rate has been restricted to just about three per cent, with food grains, which constitute the wage-goods for the poor, registering little or no price increase.

The other positive factors in the economy were healthy exports, which are up 13.5 per cent during the half-year, foreign exchange reserves, at over $66 billion, and a revival in industrial growth.

The review has drawn special attention to the impressive growth rates achieved by core industries such as cement and steel, capital goods and textile sectors.

The review noted that housing has revived due to falling interest rates and tax concessions.

The review has also claimed that tourism has picked up of late, with increased foreign tourist arrivals. The underlying source of the pick-up has been the revision of travel advisories by Australia, Britain, France, Japan and the US and the fiscal reliefs provided in the Budget.

On the food procurement front, the review noted that there is a marginal jump in market arrivals and procurement compared to last year. According to the review, the impact of the drought has seemingly been limited to rainfed areas and crops such as coarse cereals, pulses and oilseeds.

"If the agriculture sector turns out to be more resilient than initially apprehended, and the decline in foodgrains production is limited to around 10 million tonnes, the overall GDP growth in the current year may be close to 5.5 per cent," the review added.