Confirming a slowdown, Finance Minister Pranab Mukherjee on Friday said economic growth will moderate to about 7.5 percent in the current fiscal, lower than the earlier projection of 9 percent.
"I am confident that we will be covering some of the losses in our growth momentum and may end the year with over 7.5 percent," he said while addressing the Hindustan Times Leadership Summit here.
GDP growth in 2010-11 stood at 8.5 percent.
The economy expanded at the slowest pace in two years at 6.9 percent in the July-September quarter of the current fiscal. For the first half (April-September) of the fiscal, the average growth rate stood at 7.3 percent.
GDP growth in the second quarter of the fiscal slowed to 6.9 percent from 8.4 percent in the corresponding period last year, mainly on account of rising interest rates and the uncertain global scenario.
The tight monetary policy employed by the RBI to tame inflation affected the performance of manufacturing and other infrastructure sectors, with the eight core industries recording only 0.1 percent growth in October, the lowest in the last five years.
In the Budget for 2011-12 fiscal, Mukherjee had projected a GDP growth rate of 9 percent plus/minus 0.25 percent.
"My growth projection was on the basis of achievements which we have immediately after the international financial crisis of 2008," he said, adding, "I am modest. I have not said that I will be reaching the figure I projected in the Budget."
"We can not expect we can reach a high growth rate of 9 percent overnight. We will have to live with relatively moderate growth this year. Next year, we will try to improve the growth rate higher. This year, growth could be 1 percent down. We should focus on the strategy of domestic demand-driven growth," he said.
Mukherjee said considering the current global context and slowdown in the domestic industrial sector, "The growth performance is not at all disappointing."
Earlier this week, Mukherjee had said the Indian economy is battling both global and national problems and this is getting reflected in the growth numbers.
"We have been confronting the challenge posed by inflation in the past two years. Sustained high economic growth has led to improvements in purchasing power in both rural and urban areas," Mukherjee said.
Overall inflation has been above the 9 percent-mark since December, 2010. It stood at 9.73 percent in October.
Food inflation, which accounts for 15 percent of overall inflation, fell to 8 percent for the week ending November 19 after remaining elevated for four months.
He said the rise in purchasing power has accentuated demand-supply imbalances in some specific commodities, like vegetables, fruits and protein-rich items.
"In addressing this issue, we have taken both short-term fiscal and administrative measures and also medium-term steps to improve supply response," Mukherjee said.
He said in the short and medium-term, the country should emphasise on domestic demand-driven growth to ward off the adverse impact of the global crisis and improved productivity in agriculture is necessary to meet the objective of inclusive growth.
"We have already began the process of fiscal consolidation. Though it may appears extremely difficult, I am hopeful of fiscal balance targeted for the current financial year. The state governments also need to work toward fiscal sustainability," Mukherjee said.
