FM expects economy to be track in second half of 2009-19

New Delhi, Aug 26 (UNI) Finance Minister P Chidambaram today pegged the growth at eight per cent plus for the current fiscal and expressed the hope that prices will soften by mid-November when the base effect is likely to wear off.

In an intercative session with the Confederation of Indian Industry (CII) here, Mr Chidambaram expressed confidence that the ''economy will be on track'' by the second half of 2009-10.

Mr Chidambaram, however, admitted that there could be some holding back on new projects due to high interest rates, but credit off-take across sectors continues to be brisk.

Mr Chidambaram said as long as inflation continues to be high, it will be difficult to moderate interest rates.

A moderation in the upswing of the business cycle had been caused by external factors but rural demand continues to be strong in India, the Minister said.

To create demand, he said the government was pumping money into the economy by its spending on various schemes.

CII President K V Kamath said that even though the current pipeline of investments remains intact, fresh investment proposals were being affected by the rising cost of inputs, rising interest costs and signs of a slowdown in demand.

On the positive side, he said there was no problem with liquidity.

''Banks are currently having sufficient funds although the availability of long-term funds remains an issue,'' he said.

The interactive session reviewed trends in key sectors such as infrastructure, capital goods, machine tools, mining, cement, textiles, petrochemicals and other industry sectors. Across these key sectors, high cost of borrowings was having an impact on their planned capacity expansions.

Industry members expressed the view that even though demand had not declined significantly, the return on investment was being affected by rising interest rates. It was suggested that restrictions on borrowing from overseas should be relaxed.

On infrastructure, industry representatives suggested that the government should adopt 20 projects of national importance and eliminate all hurdles to their implementation.

UNI MP-GS AK NS2036