Business Daily from THE HINDU group of publications
Thursday, Aug 14, 2008
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Business Daily from THE HINDU group of publications Thursday, Aug 14, 2008 ePaper | Mobile/PDA Version | Audio |
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Economy Industry & Economy - Economy EAC pegs GDP growth at 7.7% due to slowdown Council sees greater volatility in capital inflows on account of the uncertain external environment seen Our Bureau New Delhi, Aug. 13 Global slowdown in growth, tightening of credit and equity markets following the US sub-prime crises and sharp elevation in global commodity inflation haveprompted the Prime Minister’s Economic Advisory Council (EAC) to project a 7.7 per cent economic growth for 2008-09, substantially lower than the 9 per cent growth achieved in 2007-08. This estimate was also lower than the 8.5 per cent growth forecast for 2008-09 by the EAC in its ‘Review of the Economy 2007-08’ report released in January 2008. “Considering the magnitude of the adverse economic developments in 2008, the projected drop from 9 per cent last year to 7.7 per cent this year is, in fact, modest”, says the report on the Economic Outlook for 2008-09, submitted to the Prime Minister, Dr Manmohan Singh, here recently. Sharing the details of the latest report, Dr C. Rangarajan, the outgoing Chairman of the council, told a press conference here that the EAC has pegged agriculture growth at 2 per cent in 2008-09 (4.5 per cent in 2007-08), industry growth at 7.5 per cent (8.5 per cent) and services at 9.6 per cent (10.8 per cent). Dr Rangarajan also said that the overall capital flows are likely to slow down to $ 70.9 billion during 2008-09, almost 34 per cent lower than $ 108.03 billion received in 2007-08. This would be more than adequate to finance the enlarged current account deficit (CAD), leaving about $ 29 billion to accrue to the foreign exchange reserves of the RBI. The CAD is likely to expand to $ 41.5 billion, equivalent to 3.2 per cent of GDP. “The estimated 3.2 per cent is a major increase from 1.5 per cent of GDP in 2007-08. The expansion of CAD is directly attributable to the doubling of crude oil prices”, says the report. Total net invisibles are expected to increase by 27.5 per cent to $ 92.7 billion in 2008-09. The council has also cautioned that policy makers may have to be prepared to face a situation of greater volatility in capital inflows on account of the uncertain external environment. The report has pegged the aggregate portfolio inflows estimate at $4.1 billion in 2008-09, which is a large reduction from 2007-08. Net inflows on account of loans are expected to be $ 34 billion, about 19 per cent lower than the previous year. Inflows on account of ECB/FCCB are projected to be $16 billion, about 28 per cent lower than the previous year. The council has estimated net foreign direct investment inflows of $19.7 billion for 2008-09. This is 27 per cent higher than the previous year. “We expect a lower private equity inflow this in 2008-09”, Dr Rangarajan said.
Centre ups GDP estimate to 9% Moody’s sees slowing of GDP growth to 7.7% this fiscal Crisil scales down GDP growth forecast to 8.1% More Stories on : Economy | Economy
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