New Delhi : The ongoing downturn in the Indian economy is temporary and the country would soon return to high growth as it is can withstand global economic turmoil, Finance Minister Pranab Mukherjee said today .
“The present downturn will be temporary and our economy will soon revert back to high growth,” Mukherjee said at the Delhi Economics Conclave here.
The minister said capital outflows have led to recent volatility in the value of rupee.
He pointed out that while excessive capital inflows in the aftermath of global economic crisis led to sharp appreciation in the value of Indian currency, the reversal has now caused a sharp depreciation.
“Slowdown in external demand has led to deceleration in the growth of exports in recent months with the current account deficit widening to around 3 percent of GDP,” he said.
Mukherjee said the Indian economy was facing the problems of high inflation and widening fiscal deficit but the challenges were not as serious as they were in Europe and other parts of the world .
“We also have our fiscal challenges but our problems, whether they are measured in terms of aggregate public debt or the size of the fiscal deficit, are nowhere nearly as large as the ones faced by many European nations,” he said.
“The Indian economy is, in some ways, better placed than many other nations to withstand a fresh round of global economic turmoil. India’s resilience results from the fact that the bulk of India’s GDP is domestic demand driven,” Mukherjee added.
India’s economic growth has decelerated sharply this year. The growth declined to 7.7 percent in the first quarter of 2011-12 and it fell further to 6.9 percent in the second quarter against the government’s budgetary target of around 9 percent.
Industrial output slumped into negative territory in October, raising fear of overall slowdown in the economy. Factory output, measured in terms of the Index of Industrial Production (IIP), slumped to minus-5.1 percent in October, according to the latest official data.
“Our monthly industrial growth has slowed down sharply for the month of October. This is partly a reflection of global trends, but our own fight against inflation has also taken a toll on investments by our corporations,” Mukherjee said.