CMIE scales down GDP growth

MUMBAI, OCT. 11. The Centre for Monitoring Indian Economy (CMIE) has scaled down the gross domestic product (GDP) projection to 6 per cent from 6.3 per cent for the 2001-02 fiscal along with downward revisions in agriculture, services and export growth.

``The downward revision in GDP follows the impact of poor monsoon in South India on agricultural growth and the effect of September 11 terrorist attacks in the U.S. on services sector", CMIE said in its monthly review. ``We expect a healthy economic growth in financial year 2002 but we fear that this growth is not sustainable in the coming years", it said.

The growth in agriculture has been scaled down from 7 per cent to 6.5 per cent while services are expected to grow at 6.6 per cent (earlier 7 per cent). The industrial sector's forecast remains unchanged at 4.6 per cent, it said.

Post September 11, the prospects of exports growth have worsened, hence the forecast in this sector stands revised to mearge one per cent (earlier, 7 per cent). ``This would be a major fall from the 21 per cent growth recorded in 2000-01", CMIE said.

The current account deficit was expected to go up to $3.5 billion from $2.6 billion in the last fiscal, it said adding, net invisibles were projected to take a hit due to expected fall in software exports and tourism earnings.

Net capital flows may also be lower at $5 billion ($9 billion in 2000-01). The rupee was also expected to depreciate during the remaining months of the fiscal, the CMIE said.

The index of industrial production (IIP), CMIE said, grew by 2.3 per cent during the first four months of 2001-02. ``We expect the IIP to recover in the coming months. Early signs are evident in recovery of consumer durables and sales of two wheelers and colour TVs. The recovery in agricultural sector is also expected to aid this process", it said. However, the industrial sector's likely recovery in the second half was in no way an indication of a sustainable recovery in this sector, it said. The industrial sector was hurtling towards a larger crisis in coming years and the current year's slowdown was the fourth consecutive year of decline in production of capital goods. Lack of growth in investments makes this fiscal's growth in industrial production unsustainable, it said.

``There was no indication of increase in government spending as per data available till August and ``we believe that the limited spending initiatives taken by the government may have little or no impact on growth prospects in financial year 2002".

During April-July, foreign direct investment flows at Rs. 3,528 crores were roughly at the same level in the corresponding period last year, it added. But, most of the FDI flows are for takeover of Indian companies or increase stake of foreign shareholders.

- PTI

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