GDP set to grow by 6.3 p.c. - CMIE

MUMBAI, JULY 11. The real gross domestic product (GDP) is projected to grow by 6.3 per cent in 2001-02, predominantly from the recovery of agricultural production, even as the industrial and investment climate continues to remain gloomy, according to the Centre for Monitoring Indian Economy (CMIE) here.

During 2000-01, the real GDP growth turned out to be 5.2 per cent, much lower than most estimates, CMIE said in its monthly (July) review. In 2001-02, agriculture is expected to grow by 9 per cent. Production of foodgrains is expected to increase by 8.2 per cent and that of non-foodgrains by 10.3 per cent, it added.

The healthy rains of June have increased the probability of a sharp increase in the kharif crop in the current year, it said.

The industrial sector is projected to grow at about 4.5 per cent in the best case. In April 2001, the index of industrial production (IIP) grew by only 2.7 per cent. Even if the agricultural sector records a bumper harvest this year, its impact on demand for industrial goods would be felt only later in the year, or perhaps only in the next year, CMIE said.

Investments continue to be sluggish partly because of lack of consumption demand and this demand continues to remain poor till farm incomes rise for some time and damage to urban wealth caused by the fall in asset values ceases, it added.

On balance of payments, CMIE said during 2001-02 export growth is projected to decelerate to 7 per cent compared to a growth of 21 per cent in the earlier year. It said the slowdown in U.S. and many other regions of the world were likely to have a major adverse impact on India's exports.

Imports, which had grown by 0.2 per cent in 2000-01, are projected to increase by 5 per cent. The expected decline in net invisibles during the year is projected to result in a current account deficit of $3 billion, higher than $2.3 billion in 2000- 01, it said. Capital inflows of $5 billion would exceed this amount, the CMIE added.

The current fiscal year 2001-02 has started on a weak note. The performance of most infrastructure industries as also the industrial sector have reported poor growth rates in the first two-three months, it said. The prospects of this trend undergoing a dramatic change in the coming months is poor, it added.

On money supply (M3), it said the rise in RBI credit to government pumped the expansion in M3 during the first three months of the current fiscal.

As of June, the growth in money supply was 18 per cent as against 15.7 per cent last year. Another major source of money supply growth is commercial bank credit to commercial sector, the CMIE added.

- PTI

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