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NCAER revises growth forecast

By Our Special Correspondent

NEW DELHI, JULY 31. The National Council of Applied Economic Research (NCAER), an economic think-tank, has projected that the economy would grow at a rate between 6.5 per cent and 6.7 per cent during the current fiscal year. However, NCAER's forecast is based on certain assumptions.

The council had earlier projected a growth rate between 6.7 per cent and 7.1 per cent for the current year but has cited two major developments since then because of which it has lowered the forecast. One is the replacement of the National Democratic Alliance by the United Progressive Alliance Government and the other is the evaporation of the hopes of a second consecutive normal monsoon. These two developments have the potential to dislodge growth prospects for 2004-05, NCAER has said in its latest monthly report. "There is little doubt that the investment climate worsened immediately after the new Government took over, more because of its statements than its actions. Even the Union budget, the first major policy statement of the Government, has not improved matters. Unfortunately, the internal contradictions of the ruling alliance have become sharper post-budget, causing more uncertainty on the investment climate front," the NCAER report states.

Also, a less-than-normal monsoon would mean a decline in rural income, thereby affecting demand for consumer goods. "In fact, the manufacturing sector will be affected in two more ways. First, the demand for agriculture inputs such as fertilizers, pesticides and agricultural machinery will slip and, secondly, the agro-based industries will suffer owing to a decline in supply of raw material. Another area that is expected to feel the impact of less-than-normal monsoon immediately is the inflation rate...Thus, on the whole, the prospects of the economy, which seemed bright at the turn of the new fiscal, have somewhat lost their shine," the report states.

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