Economic Advisory Council’s Projection for FY 14 and reality

The Prime Minister’s economic advisory council has come out with an extremely positive outlook projection for the Indian economy for FY 14. The salient paints are:

Economic growth rate will be 6.4%

Agriculture sector is expected to grow 3.5%

Manufacturing sector is expected to grow 4.0%

Services sector is expected to grow 7.7%

Wholesale Price Index is expected to be 6%

Primary Food inflation to be around 8%

Fuel inflation to be around 11%

Inflation in manufactured goods to be around 4%

Current Account deficit to be around 100 billion $

Merchandise trade deficit is expected to be 213 billion (9.9% of FY 14 GDP)

Net invisible earnings at $ 113 billion (5.3% of FY 14 GDP)

Fixed deficit Rs 542, 499 crore for FY 14

The chairman Mr. C. Rangarajan gave this projection to a press conference. There are 2 ways in which the projections can be presented.

Project everything to be lower than what is achievable and claim that all targets are not only met but exceeded

Project everything to be higher than what is achievable and find enough reasons to why this was not achieved. One could blame the inadequate monsoon global economic slowdown, unexpected change in gold, coal and oil prices upward so on and so forth.

For example the Current Account deficit announced for FY 13 turns out to be $ 191 billion dollars. For FY 14, it is projected to be $ 100 billion. For record purposes FY 11 the deficit was 130 billion, for FY 12, it was 185 billion. Reducing it to $ 150 billion for FY 14 will be a miracle. In the meanwhile Mr. Chidambaram has promised to bring the CAD to 70 billion dollars. How this will be achieved was not part of the press conference. Either the import must drop and export most increase significantly.

The best thing is to wait and see. How will the prime minister’s economic advisory council target will be met remains to be seen.

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