India's economy is expected to grow at around 5.5 per cent in the current financial year to March 31, 2015, according to the Mid-Year Economic Review tabled by the finance ministry in the Parliament on Friday.
The forecast is in line with Reserve Bank of India’s estimates of GDP growth for the fiscal 2014-15 and if the prediction materialises, it would mark an improvement from two successive years of below 5 per cent growth.
In the first six months of the 2014-15 financial year, India grew at 5.5 per cent on a year-on-year basis.
The government sees the current RBI policy ‘historically tight’ and expects no changes in the interest rates till March this fiscal.
Last month, the finance minister Arun Jaitley had expressed his concerns over the high cost of capital and said that if RBI lowers the cost of capital by bringing down interest rates, it would provide a "good fillip" to the economy.
“The momentum of headline inflation is showing a staggering decline...Inflation fall is not just due to base effect. Government role in inflation check is somewhat under-recognised," the review said. The retail inflation is expected to be in range of 5.1-5.8 per cent in next five quarters, the review stated.
The government is also of the view that investment is yet to pick up significantly and there is a need to speed up clearances for stalled projects.
Also, as per the report, tax revenue collections are below expectations and the full year tax growth is weaker than expected. "Budget is unduly burdened by deferred expenditure," it added. Moreover, the government has pegged current account deficit at around 2 per cent with slump in oil prices offsetting higher gold imports.
In October, the World Bank had predicted that the Indian economy may grow at the rate of 5.6 per cent this fiscal, is likely to rise further to 6.4 per cent and 7 per cent in FY16 and FY17, respectively.
The mid-year review is based on the trend study of receipts and expenditure in relation to the budget at the end of the second quarter of fiscal 2015.
(Edited by Joby Puthuparampil Johnson)