New Delhi, Dec 2 (IANS): After a slump in growth in the first two quarters of the current financial year, Finance Minister Pranab Mukherjee Friday lowered the economic growth projection to around 7.5 percent for 2011-12 from his budgetary estimate of 9 percent.
"I am modest, I am not saying that I will be reaching the figure which I projected earlier during the budget -- 9 percent plus minus 0.25 percent. I am reducing it at around 7.5 percent," Mukherjee said at the Hindustan Times Leadership Summit here.
India's economic growth has slumped to 7.3 percent in the first half of the current fiscal, substantially below the budgetary estimate. The gross domestic product (GDP) growth declined to 7.7 percent in the first quarter and it slumped further to 6.9 percent in July-September period.
Mukherjee said the economic growth was likely to be better in the second half of the current financial year. "Going forward, I am confident that we will be recovering some of the loss in our growth momentum and may end the year over 7.5 percent."
The finance minister said the government was not in a position to boost growth through stimulus as it did during the global financial crisis in 2008-09.
"I am not in a position to provide that level of fiscal stimulus that we provided in 2008-09. But certain policy changes can improve the situation little bit which we are doing," he said.
Mukherjee expressed hope the government would be able to make national consensus on key economic reforms, which are crucially important to boost economic growth.
The finance minister said stimulus packages helped the Indian economy recover from the global financial mess in 2008-09.
"At that time, through three stimulus packages we could generate domestic demand and provide some support to industrial sector through which the process of deceleration was checked dramatically and we ended the year with a growth of 6.8 percent in 2008-09," said Mukherjee.
He also said the projection of around 9 percent growth for the current financial year was based on the kind of recovery and resilience the Indian economy showed in 2008-09 and in the subsequent years.
On the problem of inflation, the finance minister ascribed this to the improved purchasing power of the people as a result of the sustained high economic growth.
"We have been confronting the challenge posed by inflation in the past two years. Sustained high economic growth in recent past has led to improvements in purchasing power in both rural and urban areas," he said.
Referring to the approach paper of the 12th Five Year Plan (2012-17), Mukherjee said the average real farm wage in India has increased by 16 percent between 2007 and 2010.
"The growth was fastest in Andhra Pradesh at 42 percent and in Odhisa 33 percent. Even in states like Bihar and UP (Uttar Pradesh) the real farm wages went up by 19 and 20 percent respectively over this period," he said.
The finance minister said the rise in general wages has "accentuated demand-supply imbalances in some specific commodities like vegetables, fruits and protein rich items, more than others".
"In addressing this issue, we have taken both short-term fiscal and administrative measures and also medium-term steps to improve the supply response," he added.
Inflation has remained stubbornly high, near double digit, for the last two years despite an aggressive monetary tightening by the Reserve Bank of India (RBI) and claims of a series of fiscal measures by the government.
Headline inflation based on the wholesale price index was recorded at 9.73 percent in October. However, food inflation has moderated in the recent week. It was recorded at 8 percent for the week ended Nov 19, according to the latest official figures.