New govt will inherit a better economy: Montek

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The new government will inherit a better economy with comfortable inflation and stable external sector which would revive growth and investments, Planning Commission Deputy Chairman Montek Singh Ahluwalia said today.

"I think the new government after the elections will basically be inheriting an economy in which, the growth will not be in free fall. Inflation is coming down. So there will not be raging inflation situation," Ahluwalia said in an interview to CNBC-TV18.

The economy in the coming months, he said, "will be positioned well before the new government actually takes over...Unless the new government mucks up the signals, we are in very quite well positioned to get the revival of investment."

The general elections are due and the next government is expected to be formed in June.

"There will not be an external instability. The new government will inherit a Current Account Deficit (CAD) which is very comfortable. Foreign exchange reserves are extremely comfortable. I think there is very positive attitude towards India," he added.

As regards inflation, Ahluwalia said, "it is getting back into a comfortable zone. If inflation is around five per cent and fall further, one can say that it is out of danger zone."

Next year, he said, the economy is all set to post a better performance, both from the growth side and also in terms of external pressures.

The CAD will come down to below 2.5 per cent of the GDP in the current fiscal from a high of 4.8 per cent of the GDP recorded in 2012-13, he said.

The economic growth rate during 2012-13 slipped to a decade's low of 4.5 per cent and during the current fiscal it is estimated to accelerate to 4.9 per cent.

"Economy is doing better. It would do better in the second half. That is going to happen because given the GDP growth of 4.6 per cent in the first half, the CSO has come out with 4.9 per cent growth estimates for the current fiscal. This implies above five per cent growth in second half of this fiscal," he added.

On scam in allocation of 2G spectrum and coal blocks, he said, it was the UPA government which brought in the system of auction for allocating natural resources.

Answering questions on stimulus provided by the government and RBI to combat impact of global crisis of 2008, he said, "the part of the problem was that GDP growth rebound very strongly. The growth in 2010-11 was around 8 per cent but it was revised, it went up to 9 per cent. So there was delay in withdrawal of stimulus.

"It is wrong to say that we have thrown the fiscal prudence out of window. We could have managed it better. We would have been much better if more of the stimulus had taken the form of direct investment rather than into holding back prices."

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