India's economy is likely to expand in the range of 7.5 percent to 8 percent in the financial year ending March 2013, Chakravarthy Rangarajan, Chairman of Economic Advisory Council to the Prime Minister said Wednesday.

The rate of growth in 2011-12 is estimated at 7.1 percent, marginally higher than the government's prior projection of 6.9 percent, which was the weakest in three years, according to 'Review of the Economy 2011-12', released today. The estimates of the council is better than the Advance Estimates published on February 7 due to the higher growth forecast for agriculture and construction.

The overall farm sector GDP growth for 2011/12 will average 3 percent, it said. Meanwhile, mining and quarrying output is forecast to log negative growth for the year as a whole.

The manufacturing sector will grow 3.9 percent and construction at a much faster pace of 6.2 percent. The council projects the service sector growth to continue to be strong, and to close the year with 9.4 percent expansion.

For the year 2011/12, the BoP position will be tight and the current account deficit will be 3.6 percent of the GDP, the council said.

Further, the council said that the current account deficit should be limited to 2.0 and 2.5 percent of GDP over the medium term. In the 2012/13 financial year, the deficit will be 3 percent.

The economic adviser said the monetary policy seems to have had its desired effect on inflation. Inflationary pressure will continue to ease through 2012/13 and will remain around 5-6 per cent for the year.

The government's fiscal balance is set to expand beyond its budgeted estimate of 4.6 percent of GDP, primarily due to much higher than budgeted subsidies, he added.

RTTNews