The Modi government today lowered its economic growth forecast for 2015-16 to 7-7.5% from 8.1-8.5%.
In its Mid-Year Economic Analysis, the finance ministry said it will be able to stick to fiscal deficit target of 3.9%, but bringing it down to 3.5% in the next will face pressure due to implementation of the 7th Pay Commission and Defence pensions.
"Given the challenges..., we estimate that real GDP for the year as a whole will lie in the 7-7.5 per cent range," it said, adding that retail inflation is likely to be within RBI's target of about 6%.
Chief Economic Advisor Arvind Subramanian said: "The economy is recovering, but it's hard to be very definitive about the strength and breadth of the recovery for two reasons -- the economy is sending a mixed signal and second, there is some uncertainty on how to interpret GDP data that have come."
As per the analysis, "the data uncertainty is in fact reflected in the mixed, sometimes puzzling signals emanating from the economy".
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