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Our Bureau

New Delhi, Nov. 24 After three years of plus 9 per cent growth in gross domestic product (GDP), India’s growth rate in the current year may moderate to a level between 7 and 8 per cent, the Union Finance Minister, Mr P. Chidambaram, said on Monday.

Addressing economic editors’ conference here, Mr Chidambaram, however, asserted that the country would still be the second fastest growing large economy in the world in the current juncture of global economic slowdown.

The Finance Minister said that the global financial crisis had already impacted the Indian equity and foreign exchange markets, but noted that the macroeconomic impact of the crisis had been muted due to the overall strength of domestic demand and predominantly domestic nature of financing of investment.

Stating that a lot had to be done in the infrastructure sectors — both economic and social – the Finance Minister said that increasing expenditure in the infrastructure sector was an important part of the counter-cyclical measures that were being contemplated to address the impact of the global slowdown.

Even as India faced a difficult situation on account of the global financial turmoil, which has also affected the country’s money, debt and credit markets, Mr Chidambaram sought to emphasize that India was nowhere near a recession.

“The growth estimate for the first quarter of 2008-09 was 7.9 per cent and the second quarter would, undoubtedly, show high positive growth. Therefore, we must banish the thought of recession,” he said.

The financial crisis that had enveloped the world since 2007 has become worse and many developed countries including Germany, Japan, the UK and the Netherlands were officially in recession.

Many more including the US and France are expected to slip into a recession shortly, Mr Chidambaram noted.

The Finance Minister said that India needs to seize the opportunity to review and revisit pending reforms in the next few years even while insulating to the extent feasible from the adverse changes in the global economic environment.

To a question on infrastructure investment, the Finance Minister noted that efforts would be made to find domestic resources, in the wake of drying up of overseas credit.

He, however, highlighted that India was in talks with the World Bank to double its annual loan assistance to India from the current $3 billion to $6 billion.

Meanwhile, on foreign institutional investors (FIIs), Mr Chidambaram said that FII investments in India have turned positive in November 2008, after net selling by them in September and October 2008 due to redemption pressures from abroad.

He expressed hope that the turnaround in November 2008 would be sustained in the coming months also.

On fiscal consolidation, the Finance Minister said that the Government had also provided for more expenditure in the current year as a counter cyclical measure. “As a consequence, we may need one more year to achieve the FRBM target of eliminating the revenue deficit and containing the fiscal deficit to below 3 per cent of GDP,” he said.

On the proposed income tax code, the Finance Minister said that the tax code was ready, but the discussion paper, which is expected to be first placed in public domain, was being finalised.

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