The Hindu : Business : NCAER predicts 6.7-7.1 p.c. GDP growth

Online edition of India's National Newspaper
Friday, Apr 30, 2004

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NCAER predicts 6.7-7.1 p.c. GDP growth

By Our Special Correspondent

NEW DELHI, APRIL 29. The National Council of Applied Economic Research (NCAER), an economic think-tank, has claimed that there was a `feel good' factor in the air about growth prospects during 2004-05. On the back of a 8.1 per cent plus growth expected during 2003-04, the NCAER has projected that the economy would grow at 6.7 to 7.1 per cent during the current fiscal year.

According to estimates by NCAER economists, agricultural growth is expected to return to its long-term average of 3 per cent in 2004-05 but industrial growth would become more broadbased as was the trend in 2003-04. All the use-based industrial segments, namely, basic, intermediate, capital and consumer goods, had posted growth in excess of 5 per cent during April-February 2003-04. The performance of the capital goods sector in particular was noteworthy and was also a pointer towards the revival of investment activity in the economy. Also, non-food credit growth in the last quarter of 2003-04 was the highest ever, indicating industrial revival including investment.

Also, with non-food credit finally picking up, there was less pressure now on the banking sector to revise the interest rates in the short term and much would depend on the Reserve Bank of India's forthcoming monetary and credit policy to be announced in May, the NCAER said.

On inflation, the NCAER said that with the arrival of rabi crop in the market, prices of primary articles were expected to come down. On the other hand, the upward revision of petro prices, imminent after the Lok Sabha elections in view of the hardening of international oil prices, would lead to a rise in the prices of fuel and power. However, the upward pressure on petro prices might be partly offset by the appreciation of the rupee against the dollar.

In conclusion, the NCAER said if the economic environment improved with the new Government in place, there could be a positive impact on private investment and, in turn, on growth. NCAER economists, therefore, forecast that if private investment growth increased from 11.8 per cent to 14.5 per cent in nominal terms, the gross domestic product (GDP) growth in 2004-05 could go up from 6.7 per cent to 7.1 per cent.

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