GDP growth in FY14 likely to be lower than expected at 5.3%: Rangarajan

India's economic growth in fiscal 2013-14 is likely to be 5.3 per cent, sharply lower than previous forecast of 6.4 per cent, C Rangarajan, chairman of the Prime Minister's Economic Advisory Council said on Friday.

The Indian economy grew at 5 per cent in the last fiscal year, which was the slowest in a decade.

The revised numbers are a clear indication of the sharp slowdown in the Indian economy. In the first quarter ending June 2013, the GDP grew at 4.4 per cent.

With the sharp downward revision, the estimates of the PMEAC are now in line with other ratings agencies such as Standard & Poor's (5.5 per cent) and Moody's (5 per cent).

Dr Rangarajan said inflation will likely be around 5.5 per cent by March 2014, while current account deficit (CAD) is likely to moderate to 3.8 per cent of GDP in 2013-14 from 4.8 per cent a year ago.

Here are the key highlights:

Keeping fiscal deficit target a "challenge"

India may it find it a "challenge" to stick to its fiscal deficit target of 4.8 percent of GDP in the fiscal year that ends next March, the prime minister's economic advisory panel said in a report on Friday.

The country's bloated fiscal deficit has been a key concern for Asia's third-largest economy -- currently undergoing its worst slowdown in a decade -- and has triggered the threat of a sovereign credit rating downgrade by global ratings agencies.

The panel also said that the Reserve Bank of India (RBI) must maintain its current monetary stance until the rupee stabilises. India's currency dropped to record lows against the US dollar in August.

The panel said that net foreign direct investment (FDI) flows would likely be at $21.7 billion for the current fiscal year, down from an earlier estimate of $24 billion.

Drawdown on foreign reserves to fund CAD

The economic adviser to Prime Minister said there will be a drawdown on foreign exchange reserves to fund a wide current account deficit, but forecast the deficit could narrow to below $70 billion this fiscal year.

C. Rangarajan said that if current trends of imports and exports continued that would help the deficit, and predicted the rupee could recover from current levels of 63.8 against the dollar as capital inflows improve.

(With inputs from Reuters)