NCAER pegs GDP growth at 6.4 t0 7 p.c.

NEW DELHI, MAY 2. The Indian economy is likely to register a higher growth rate between 6.4 and 7.2 per cent in the current financial year as against six per cent achieved last year, the National Council for Applied Economic Research (NCAER) has said. ``The growth is contigent on a good performance of agriculture which again is conditional on the monsoon for the year," the leading think tank's review of the economy released here today said.

The review has also forecast the overall inflation to hover between 4.5 and 5 per cent during the year.

Assuming a five per cent depreciation in the exchange rate, the NCAER has pegged the trade and current account deficits at 2.5 per cent and 2 per cent of the GDP respectively.

The fiscal deficit of the Centre would be in line with the estimates of the 2000-01 budget projections of 5.1 per cent, provided there are no expenditure overruns or serious shortfalls in the disinvestment of public sector undertakings.``The fiscal deficit relative to real economic gross domestic product (GDP) will be close to five per cent only if overall GDP growth remains above 6.5 per cent," the NCAER said in the review.

The review has forecast that the industrial growth rate during the year would be led by dynamic segments of information technology and telecom in the overall manufacturing and services sectors in the economy.

Projecting a comfortable supply situation on the foodgrains front, the council, however, said the Agriculture Ministry's target of 212 million tonnes of production would be subject to a normal monsoon.

``The achievement of these targets depends on the performance of monsoon rainfall and its behaviour over time and spread across various regions of the country. Given the uncertainty of monsoon, this appears to be a difficult target (212 million tonnes)," the review said.

With wheat procurement expected to cross 16 million tonnes, the food stocks in the State account are likely to be above 40 million tonnes against a minimum norm of 24.3 million tonnes as on July 1 compared to 30 million tonnes at the beginning of March.

``Therefore, in sum, normal monsoon coupled with more than adequate level of food stocks signify a comfortable supply situation for the economy during the current year," it said.Stating that the slower foreign direct investment (FDI) inflow during 1999-2000 was a matter of concern, the NCAER said that greater attention was needed to provide a conducive environment to attract foreign capital.

The overall economic growth, however, would also be subject to the level of capital inflows that lead directly to new investments.

``As real interest rate in the domestic economy continues to be high, the FDI can be a catalyst for new investment, particularly if they relieve the potential pressures on infrastructure services," the review added.

Commenting on the global economic trend, the review has said that the pick up in global ecomonies had translated into tangible benefits for India in the area of external trade. ``Both exports and imports picked up during the year gone by and foreign exchange reserves continued to improve reaching about $38 billion by March 2000," the review said.

The world trade volume is projected to grow by 6.2 per cent in the year 2000 as compared to 3.4 per cent in the previous year, the council said adding that the IMF has projected growth of outputs for the advanced economies at 3.5 per cent for the year 2000.

The NCAER review has said the liberalisation in the procedures for accessing external commercial borrowings (ECBs) and the recovery of the domestic industry was likely to improve ECB inflows.

A steady exchange rate, lowering of interest rates and low rate of inflation were attractive signals for foreign direct investments, the review said.

The assessments in the NCAER review are based on the projected trends for the global economy, fiscal proposals contained in the Central Budget for 2000-01 and a set of assumptions on agricultural scenario for the year.

- PTI

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