India's economy is likely to have grown more than 7 percent year-on-year in the April-June quarter and should expand by the same pace in the July-September quarter, its finance minister said on Thursday.
"Except in Q2 of 2004-05 when the GDP grew by 6.7 percent, in every other quarter of the last 10 quarters, including the quarter that will end on 30th September 2006, the growth rate has been over 7 percent," Finance Minister Palaniappan Chidambaram said.
GDP data for the April-June quarter is due on September 29. The economy grew 8.4 percent in the fiscal year to March 2006 and the central bank expects it will expand 7.5-8.0 percent in 2006/07. Giving a speech on "Economic Policy Making in a Coalition Era", Chidambaram cautioned that coalition governments tend to become "somewhat liberal or populist" in their fiscal stance as elections near. The next general election is not due until 2009 but he noted that as polls get closer the attractiveness of spending can become irresistible.
"There is a temptation to resort to higher levels of government spending and lower levels of taxation which are believed to be magnets for voters," he said.
He warned such an approach shifted the fiscal cost from the current generation to future generations. "While more spending and lower taxes may have immediate tangible benefits, the hidden costs are not visible to the current voters."