India can grow 7.4% next fiscal: Plan panel to PM

“We have worked out a model where we have built growth scenarios for the next year. This is to assess the impact of the current financial year’s stimulus as well as see what happens if an additional stimulus of at least 1 per cent of GDP is given next year,” Deputy chairman Planning Commission Montek Singh Ahluwalia told The Indian Express.

Earlier,on the sidelines of a business function,Ahluwalia said the economy was expected to grow around 6.5 per cent in 2008-09. This growth estimate was arrived at after simulating the effect of the global recession,drop in investment,falling exports and lower oil prices,and reflects a sharp fall from 9 per cent or more rise in the past three years. “The net result of that is that growth will be somewhere around 6.5 per cent or something this year,” he said.

The commission has also identified various sectors and schemes where the additional stimulus of Rs 30,000 crore can be absorbed next year and fuel demand. These are typically projects that can be commissioned and completed in one to two years without requiring repeated fund infusion.

“We have identified irrigation,rural roads,drinking water,sanitation and water supply as key areas where funds can be given,” said Kirit Parikh,a Planning Commission member. The commission has also asked states to project how much more they can absorb under various Central schemes. It may consider a second round of demands under the flagship schemes especially when there are indications from states that they will borrow more.

The commission says that next year might not be actually the worst year if growth picks up by November 2009 or by the third quarter. The International Monetary Fund had said last week that the world economy was expected to shrink by as much as one per cent in 2009.