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Tuesday, July 17, 2012

Growth expectations likely to remain muted

The planning commission had set out an ambitious target of spending US$1 tn on infrastructure in the 12th five year plan. But in light of current growth prospects it seems that target is on the verge of being missed. It may be noted that the target of US$ 1 tn was based on GDP growth expectations of about 9%. And now, since the growth expectations are revised down wards, spend is likely to change. Also, it may be noted that target was given when the rupee was hovering at about 44 to the US dollar. But with rupee depreciating significantly in the recent past, the dollar equivalent spend is bound to impact the target. Now, we know that infrastructure is the backbone of any economy. So, unless the government takes calculative steps to increase spend, growth expectations are likely to remain muted in the near term.

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