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PM’s panel pegs economic growth at 6.7%

Prime Minister’s economic advisory panel on Friday pegged  gross domestic product (GDP) growth for the current financial year at 6.7 per cent, painting a better picture of the economy than by other think-tanks.

It, however, added that inflation would remain high during the fiscal at 6.5-7 per cent, mainly due to poor monsoon which will pull down the agriculture growth rate to 0.5 per cent from 2.8 per cent last year.

‘Economy will grow at 6.7 per cent in 2012-13,’ Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan said while releasing ‘The Economic Outlook for 2012-13’.  

Making a strong case for reforms, Rangarajan asked the government to open multi-brand retail to foreign investment and raise diesel prices in one or more steps to contain the subsidy bill.

He also recommended a curb on import of gold and improvement in regulatory regime to encourage investment in mutual funds and insurance. The Reserve Bank  of India (RBI) had earlier lowered its growth projection for 2012-13 to 6.5 per cent from 7.3 per cent estimated earlier.

Rangarajan remained optimistic about the growth prospects in the current year despite other agencies like Crisil and Moody's projecting a growth rate of 5.5 per cent on account of global problems and deficient monsoon.

The PMEAC chief suggested host of measures like allowing FDI in multi-brand retail and a big push to infrastructure spending to accelerate economic growth.

‘For channelising transfer of capital and technology, FDI in multi-brand retail up to 49 per cent may be allowed to attract investment in this sector....’, Rangarajan said.

Making a case for reforms in aviation sector, he said, the government should consider allowing foreign airlines to pick up 49 per cent FDI in domestic airlines.

In order to encourage investment in infrastructure sector, he said the government should recast Cabinet Committee on Infrastructure as the Cabinet Committee for Sustainable Development of Infrastructure and make special efforts to clear high-impact infrastructure projects costing over Rs 5,000 crore.

Referring to oil sector, Rangarajan suggested 'a suitable increase in the price of diesel in one or more steps, and a cap on the level of consumption of subsidised domestic LPG close to what is currently being consumed by poorer households (i.e. 4 cylinders)'.

Referring to the price situation, he said, the government needed to improve marketing and storage facilities to deal with supply-side problems. Making a case for bringing about predictability in taxation regime, Rangarajan said efforts were needed to address investor concerns. He was referring to concerns expressed by investors over retrospective amendment to Income Tax Act and the General Anti-Avoidance Rules (GAAR).

The initiatives to check petroleum subsidy would help contain fiscal deficit and deal with rising problem of crude in the international market, Rangarajan said.
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