The Hindu Business Line : NCAER raises GDP forecast to 8 pc

THE National Council of Applied Economic Research (NCAER) has revised its forecast of gross domestic product (GDP) growth from 6.98 per cent it made in October 2003 to 8 per cent during the current fiscal year because of "perceptible change" both in the earlier forecast of normal monsoon and an uncertain global economic situation.

In its latest monthly publication, Macrotrack, the independent think tank has said the reasons for its revised forecast for 2003-04 stem from several factors. These include, among others, bumper crop production in agriculture, increase in government consumption by nine per cent in normal terms, 10 per cent increase in government investment and nominal appreciation of four per cent of the Indian rupee vis-à-vis the US dollar.

Stating that there are many positives on the domestic front as well, it said the foodgrain production is expected to touch 220 million tonnes this fiscal. Bolstered by the improved business confidence, industry is expected to register 7 per cent growth. The higher growth in industry is driven by higher investment and higher demand arising from income growth due to substantial rise in GDP originating from agriculture.

According to the Council, another indicator the stock market is also witnessing an upsurge that has not been seen in the past. The Bombay Stock Exchange Sensex registered a growth of 70 per cent in 2003 alone and crossed the 6000 mark on January 2, it said.

There is also an improvement in the revenue receipts of the Central government during the first eight months of this fiscal, which was largely an outcome of a substantial growth in tax revenue.

Moreover, the Council said, the disinvestment proceeds this fiscal is likely to exceed the budgeted amount of Rs 13,200 crore due to the forthcoming initial public offering of ONGC and GAIL.

However, the Council is sceptical about fiscal deficit reduction target being scored since the fiscal deficit might not witness a substantial reduction this fiscal in view of the enhanced non-plan capital expenditure and higher rate of inflation.

Referring to the external sector, it said even with a stronger rupee vis-à-vis dollar, the exports are estimated to grow at about 6 per cent in rupee terms and 10.5 per cent in dollar terms. Imports on the other hand is more buoyant with projected growth of about 15 per cent in rupee terms and more than 20 per cent in dollar terms.

The current situation with relatively much stronger rupee vis-à-vis dollar would lead to a trade deficit of 2 per cent, even as the current account deficit would remain marginally positive, the council noted.