Quality governance can uplift economic mood in 2013: ASSOCHAM

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Quality governance can uplift economic mood in 2013
The quality of governance, inflation and the government's fiscal situation will remain the key differentiators in 2013 between India managing to cope up with the global slowdown and further erosion in the economic growth, an ASSOCHAM report said on Tuesday.

While the ASSOCHAM report on the 2013 economic situation does not see India's growth exceeding six per cent in the current fiscal, it may not exceed 6.2-6.5 per cent even in the FY 14.

Despite some optimistic views on the downslide having bottomed out, Indian economy is still grappling with the key problems of high inflation and high interest rates, lack of investor confidence and a terrible situation for exporters, it said.

"Under these circumstances, it is the quality of governance and the political leadership which only can make a big difference", ASSOCHAM President Rajkumar Dhoot said.

While the Reserve Bank had given an indication of interest rates cut later this month, reining in inflation will continue a priority for the central bank, however much the industry demands for the rate cut, the ASSOCHAM report pointed out. "We do not see rate of more than 100 basis points in 2013," it said.

With the fiscal deficit crossing 80 per cent of the budgeted for the entire year in the first eight months of the current financial year and the current account deficit widening to 5.4 per cent of the GDP in July-September quarter, signals about the state of government finances are not quite comforting. 

However, the situation will only improve in the medium to long term as the savings and investments, still stay above 30 per cent of the Gross Domestic Product. 

The balance of trade with China, the Asian powerhouse, has to be corrected and our exports must equal or at least near -equal to imports from China. Despite some slowdown the Chinese economy continues to grow raising the global demand for commodities, the report said.

Back home, it would take at least another 18 months before we can expect a complete turnaround, that too if the global situation improves.

However, on the positive side the mood in the stock market has improved in the last few weeks with the foreign institutional investors pouring in money. But the global factors like the US fiscal cliff can mar the story. "We keep our fingers crossed," the report said.

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Read more about: assocham, inflation, economy
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