The Hindu Business Line : NCAER pegs GDP growth at 6.7%

THE National Council of Applied Economic Research (NCAER) foresees the gross domestic product (GDP) growth to be 6.6-6.7 per cent in 2004-05, against 8.2 per cent in 2003-04, taking due note of developments, internal and external, while revising the growth rate.

In its latest quarterly review released here, the Council, however maintains, "On the whole economy appears to be heading for a reasonable growth this fiscal, mainly backed by investment revival and growth in non-agricultural sector."

On the fiscal front, it said the Government's performance in view of the Fiscal Responsibility and Budget Management Act has not been very encouraging.

Going by the trends in receipts and expenditure so far, tax revenue of the Central Government is likely to fall short by Rs 9,600 crore and non-tax revenue by around Rs 7,400 crore.

"Thanks to the higher non-debt capital receipts under the debt swap scheme the fiscal deficit situation looks better, but the more relevant revenue deficit seems to be a bit out of control," the Council cautioned.

Stating that there were two important developments that have supervened in recent months, the Council said they have the potential to significantly alter the course growth process itself.

Firstly, the implementation of value-added tax by the States from April 1, 2005 and secondly the project of spending Rs 1,70,000 crore on upgrading the highways over the next seven years.

It said inflation as measured by the year-on-year increase in wholesale price index has dropped below 6 per cent for the week ending January 1, 2005.

But market expectations have still not subsided. But the RBI's stance to keep the inflationary pressure under check by using those instruments that affect liquidity in the banking system without directly raising the cost of borrowing have paid dividends.

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