The Hindu Business Line : NCAER pegs GDP growth at 7.8 pc

THE National Council of Applied Economic Research (NCAER) has come out with its final estimates of gross domestic product growth at 7.8 per cent (1993-94 prices) for the current fiscal on the back of "benign inflation, the bullish stock market, a robust industrial and export performance and the good monsoon."

This comes close on the heels of the Central Statistical Organisation's advance estimates of 8.1 per cent GDP growth for this fiscal.

In the quarterly review of the economy, the council said that the 7.8 per cent growth is 0.23 percentage points up from 7.6 per cent projected in October 2005. The modest spurt is likely to originate from the services sector.

NCAER expects the agriculture, industry and services sectors to grow at 3.4 per cent, 8 per cent and 9.3 per cent respectively this fiscal. The council forecasts "a slippage of around Rs 4,000 crore in tax revenue collection. The fiscal deficit for the year is likely to be around 4.4 per cent, which is higher than anticipated in the budget document." Thanks to profitable public sector firms agreeing to pay special dividends to the Government and better growth, the slippage is small, the council said.

The average inflation rate is expected to be 5.3 per cent. The real effective exchange rate (REER) of the rupee has appreciated by 5.4 per cent from April to November 2005. This rate of appreciation is much higher than the rates (between 3 and 3.4 per cent) seen in the previous three years. Despite the appreciation of the REER and the decline in exports in November 2005, export growth during the first three quarters has been a healthy 18 per cent.

Imports grew by 27 per cent during the same period. The higher import growth compared to export growth has resulted in the current deficit in the first half swelling to $13 billion. The current account deficit will, therefore, be around 2.8 per cent of the GDP. Exports are expected to grow at 19.5 per cent and imports 23.9 per cent this fiscal, it said.