Slowdown over, growth recovery in 6 months: Montek

The economy will turn the corner in the next six months as the deceleration of the past several quarters has been arrested, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Monday.

"It is our hope that in the second half of the year, which has begun just now, many of the measures taken by the government in the recent past to revive investor confidence

will lead to a turnaround setting in in the second half," Ahluwalia said while addressing a banking summit organised here by Yes Bank and Financial Times.

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Confident of better gross domestic product numbers in the second half, Montek said, "In the first six months of the current year, GDP growth is around 5.5 per cent...and I think the second half will be better.

"Somewhere around 6 (per cent) is a reasonable basis to start working from. It could be a little better, it could be a little worse."

Basing his optimism to the pick up in the August Index of Industrial Production numbers as also in the recent PMI surveys, Ahluwalia said there are signals of an up-tick.

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"We have two signals already, the industrial production index appears to have gone up a little in August and PMI is doing a little bit better.

"I am using that as a touchstone. . . The government is back in action. Therefore I am willing to interpret the slight up-tick in the industrial production index as an example of deceleration having been arrested.

After languishing for many months, the factory output numbers for August showed growth at 2.7 per cent, but the April-August IIP remains almost flat at 0.4 per cent against 5.6 per cent in the year ago period.

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The IIP readings were low due to the poor show by the manufacturing sector and contraction in capital goods output. Partly blaming the coalition pressures on the policy delays, Ahluwalia said, "We took time taking the reform measures because of the pressures of coalition, there was a consultative process to be carried."

He also said the slowdown is not primarily due to global slowdown.

"Our analysis is that the slowdown is not because of international factors, our perception is that there are many domestic concerns such as procedural and implementation issues, especially in case of large infra projects."

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Stating that the growth deceleration being witnessed for the past several quarters has certainly ended, he said, however, that it is still too early to say whether it's actually a turn-around, although the government has taken a number of steps to boost investor confidence.

"It is reasonable to say that the slowdown has certainly ended but we are yet to see how strong this recovery is going to be," Ahluwalia told the summit.

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On the latest inflation numbers, which inched up to 7.81 per cent in September, up from 7.55 per cent in the previous month on higher diesel prices, he said it's better than last year but still not at our comfort level of 5-6 per cent.

"You can't say that the economy is overheated. Inflation is above the comfort level.

"There is no question about it. . . but it is a lot better than last year.

"I think the government has taken a number of steps which give us more fiscal room than we had before. . . We have seen a lot of positive action.

"We will be able to take inflation to more moderate levels," Ahluwalia said.