FM confirms turnaround for the economy
India’s Finance Minister Pranab Mukherjee has said that the country’s macro economic situation confirms signs of a turnaround for the economy. The FM said this while presenting the ‘Mid-Year Review 2009-10’ in the Parliament. This is as per the provisions of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which requires that review in trend of receipts and expenditure be undertaken in relation to the budget on a quarterly basis. The mid-year review document is the second quarterly review, he said.
The first quarter GDP released on August 31, 2009 had hinted at a recovery with growth in real GDP being placed at 6.1% (up from a level of 5.8% each in Q3 and Q4 of 2008-09). The growth in real GDP in Q2 was 7.9%. GDP growth in the first half (H1) of 2009-10 is now placed at 7.0%, the FM noted.
He also said that the government’s monetary policy had remained accommodative in the wake of the impact of the global financial crisis since the second half of last fiscal. The continuance of the policy stance was considered apposite in the current context thus far, with the objective of providing for credit expansion at viable rates while preserving credit quality so as to support the return of the economy to a steady growth path. RBI’s second quarter review of monetary policy 2009-10 (October 27, 2009) expressed the dilemma of inflationary concerns calling for an early exit from accommodative monetary policy as contrasted with growth drivers warranting a delay in such exit, the FM pointed out.
He also brought attention to the fact that given the higher interest rates and the return of investor confidence in global financial markets, there has been a revival of net capital flows to emerging market economies, the FM remarked. The revival of net FII inflows this year was marked by a rise in the equity market indices, he said. The BSE SENSEX rose by 73.6% between end-March 2009 and November 11, 2009. Net FII inflows and positive domestic factors including investor confidence in India’s growth prospects and better than expected performance of corporates and banks were the main factors behind this performance, he added.