New Delhi, Dec 14 (IANS): The current downturn in Indian industrial and economic growth is temporary and the country would soon revert to high growth path as it is better placed to withstand global economic turmoil, Finance Minister Pranab Mukherjee said Wednesday.
"I am expecting that the present downturn will be temporary and our economy will soon revert back to high growth," Mukherjee said at the Delhi Economics Conclave here.
Mukherjee said capital outflows have led to recent volatility in the value of rupee. He pointed out that while excessive capital inflows in the aftermath of global economic crisis led to sharp appreciation in the value of Indian currency, the reversal has now caused a sharp depreciation.
"We have witnessed sharp depreciation of the rupee vis-a-vis the US dollar in the last few months. Slowdown in external demand has led to deceleration in the growth of exports in recent months with the current account deficit widening to around 3 percent of GDP," he said.
Mukherjee said the Indian economy was facing the problems of high inflation and widening fiscal deficit but the challenges were not as serious as they were in Europe and other parts of the world as well.
"We also have our fiscal challenges but our problems, whether they are measured in terms of aggregate public debt or the size of the fiscal deficit, are nowhere nearly as large as the ones faced by many European nations," he said.
"The Indian economy is, in some ways, better placed than many other nations to withstand a fresh round of global economic turmoil. India's resilience results from the fact that the bulk of India's GDP is domestic demand driven," Mukherjee added.
India's economic growth has decelerated sharply this year. The growth declined to 7.7 percent in the first quarter of 2011-12 and it fell further to 6.9 percent in the second quarter against the government's budgetary target of around 9 percent.
Industrial output slumped into negative territory in October, raising fear of overall slowdown in the economy. Factory output, measured in terms of the Index of Industrial Production (IIP), slumped to minus-5.1 percent in October, according to the latest official data.
"Our monthly industrial growth has slowed down sharply for the month of October. This is partly a reflection of global trends, but our own fight against inflation has also taken a toll on investments by our corporations," Mukherjee said.
The finance minister admitted that his government had very limited options to combat the industrial slowdown and curb fiscal deficit in the current global economic scenario.
"The current build-up of concerns has been incremental in nature with a series of local intermittent shocks getting transferred to the global economy. All this has happened despite the aggressive use of both fiscal and monetary policy tools and our collective resolve to keep markets open," he said.
"This poses some serious problems for the policy makers. Going forward, it limits our options in dealing with the emerging situation," the finance minister said.