Worst is over for Indian economy, says Montek

The deputy chairman of the Planning Commission, Montek Singh Ahluwalia, said on Tuesday that the worst is probably over for the Indian economy and performance would be better in the second half of the financial year.

"Core sector performance does give some sign (of recovery) ... the demand on the part of industry is not so strong, so I would say that clearly the economy has bottomed out, but we don't have strong enough signal yet of recovery. But I am hopeful that the second half of the fiscal would be better," Ahluwalia told reporters at a function in Delhi.

Government data showed the core sector industries recording 8 per cent growth in September, the fastest pace in the past 11 months.

The Indian economy grew at a decade-low rate of 5 per cent in the last financial year ended in March. Gross Domestic Product Growth (GDP) in the first quarter of this year (April-June) slowed to 4.4 per cent from 4.8 per cent recorded in January-March, 2013.

This pace of growth is far lower than the 8.3 per cent rise that was recorded in September 2012.

About the Reserve Bank of India's recent hike of the short term lending rate by 0.25 per cent to 7.75 per cent last month, he said, "RBI has handled it very well. Whenever you are dealing with a difficult situation, you should get back to normal."

Ahluwalia agreed with the central bank's view that the India is not comfortable on the inflation front. However, he made a case for stimulating economic growth.

Ahluwalia said GDP growth is very tepid and the country has to strike a difficult balance between boosting growth and taming inflation.

Supporting the Kirit Parikh committee's recommendations, the de facto chief of the plan panel said, "The issue of whether we should adjust price of petroleum products and phase out subsidy, there is no doubt (on) that. At least, the Planning Commission has been of the view that this must be done."

Recently, the plan panel has suggested that diesel prices should be hiked by a steep Rs5 per litre, kerosene by Rs4 a litre and cooking gas (LPG) by Rs250 per cylinder immediately to cut fuel subsidy bill by Rs72,000 crore.

Ahluwalia said the fuel price hike cannot be done immediately; but action should be taken quickly.