The Hindu Business Line : NCAER revises GDP growth upwards to 7.6 pc

Even as exports are expected to remain buoyant, export growth in dollar terms is likely to decline from over 24 per cent last fiscal to nearly 22 per cent this year.

New Delhi , Nov. 9

THE National Council of Applied Economic Research (NCAER) has revised upwards the gross domestic product (GDP) growth for the current fiscal to 7.6 per cent, higher than the 7.1 per cent forecast in July, mainly on account of higher agricultural output.

In its quarterly review of the Indian economy, the Council said agricultural output is likely to be 3.4 per cent compared to 2.5 per cent in the July forecast, when the monsoon had just set in and was behaving erratically.

The first quarter GDP growth of 8.1 per cent for the current fiscal was good. "Low inflation, a bullish stock market, robust industrial recovery and a good monsoon have all helped brighten growth prospects for this year," it said.

Industry and services are likely to improve their performance as they are projected to grow at eight and nine per cent respectively this fiscal. Even as exports are expected to remain buoyant, export growth in dollar terms is likely to decline from over 24 per cent last fiscal to nearly 22 per cent this year.

Similarly, import growth is also likely to decline from nearly 36 per cent to more than 26 per cent. A relatively faster growth of imports, compared to exports, might result in a current account deficit of around 0.4 per cent of GDP.

Stating that inflation would be milder this year at 5.9 per cent compared to 6.5 per cent last year, the Council cautioned that the persistent high oil prices and a somewhat liberal monetary policy suggest that the uptrend in the inflation rate will continue.

The Council said the rupee has once again been depreciating vis-à-vis the dollar in the first six months of this fiscal. Between March and September, it had depreciated 0.4 per cent.

"This makes exports more competitive compared to the past few years when the rupee was appreciating."

Pointing out that the fiscal scenario appears `mixed' with fiscal deficit growth in the first five months overshooting the growth target for the year, the Council, however, said that the growth in the revenue deficit during the period has been lower than the annual targets.

But "this is more due to discontinuation of the debt buyback scheme, treating disinvestment as an off-Budget item and the implementation of the Twelfth Finance Commission's recommendations".

Providing a medium-term perspective for 2005-06 to 2009-10, the Council optimistically contends that the Indian economy is "poised for sustained growth of 7.7 per cent per annum for 2006-07 to 2009-10".

However, the monsoon is a major risk factor considering the fact that agricultural growth in the last decades has been falling consistently from 4.4 per cent in the 1980s to three per cent in the 1990s and to 2 per cent for 2001-02 to 2004-05.

For the next four years, the average growth of agriculture is expected to be 2.3 per cent (based on the assumption of normal rainfall). Industry and services are expected to grow at 8.1 per cent and 9.3 per cent respectively in the next four years.

Both exports and imports are expected to grow at a relatively lower rate compared to 2005-06.

Prices are likely to grow on an average at 5.6 per cent in the next four years.

Noting that the impact of sustained growth is clearly reflected on the Central Government's fiscal deficit, the Council said though the fiscal deficit is expected to rise, it is likely that the average fiscal deficit in the next four years would be 3.5 per cent of GDP.

Referring to the Tenth Plan (2002-07) performance, the Council said the Plan is likely to have an average GDP growth of 6.9 per cent, the same as the Mid-Term Appraisal (MTA) estimate.

But there are differences in sector level growth rates, the Council said.

While the MTA put the agriculture sector growth at 2.2 per cent, the NCAER estimates it at 1.8 per cent. Even industry is expected to grow at 7.4 per cent than the MTA assessment of 7.6 per cent.

The services sector will grow 0.2 percentage points faster at 8.8 per cent than the MTA projection of 8.6 per cent.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page