Risks to 9% growth: inflation, rising crude price, volatile markets
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Ahead of the Union Budget 2011-12, the government today listed volatility in the capital markets, spiralling crude oil prices and high inflation as key challenges facing the economy but remained optimistic about the GDP growth of 8.5 per cent in the current fiscal.
"While the stock market has its own mind and it takes cues from developments all around, the fundamentals of the Indian economy are strong," finance minister Pranab Mukherjee said on Wednesday.
Blaming external factors for the fall in stock markets, he said, "There has been some volatility in the Capital Markets, led by continued selling pressures from foreign institutional investors." The 30-share sensitive Sensex of the Bombay Stock Exchange has seen its steepest fall in over two years in January.
The turmoil in Egypt has also raised global crude oil prices and has become a source of concern for the government.
Earlier in the day, Mukherjee said that the government is closely watching crude oil prices. "Unfortunately, because of developments in the Middle East and its impact on the Arab world... (it) is causing uncertainty about production, about availability. We are watching the situation and are in touch with the petroleum ministry."
The finance minister expressed hope that the financial year would end on an optimistic note. "I am confident that we will meet our growth projection for the year. And will end with a better-than-projected fiscal balance and more moderate inflation," he said.
The Centre's fiscal deficit is likely to be lower than the targeted 5.5 per cent of the GDP in 2010-11 on the back of higher revenue growth and better-than-anticipated realisation of funds from sale of 3G spectrum, giving the government more headroom to spend. Fiscal deficit amounted to a mere 45 per cent on the full fiscal target by December end, 2010.
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