CMIE too sees 7 pc GDP growth

MUMBAI, JULY 10: Indian economy is set to perform better in 2000-01 than the last fiscal as gross domestic product GDP is projected to e...

MUMBAI, JULY 10: Indian economy is set to perform better in 2000-01 than the last fiscal as gross domestic product GDP is projected to expand by seven per cent compared to 6.4 per cent estimated for 1999-2000. The sustained growth in the industrial and service sectors, along with improved agricultural production, will help India post a slightly faster growth rate in 2000/01, the Centre for Monitoring Indian Economy CMIE has said.

The CMIE, an independent economic think-tank, estimate was in line with Finance Minister Yashwant Sinha8217;s forecast last week that the economy would grow over seven per cent, though Sinha also expressed concern about the fiscal deficit and said bold measures were planned to control spending by the state governments.

The CMIE said agricultural growth this year would be higher at 4.5 per cent compared with 1.3 per cent in 1999, while growth in the industry and service sectors would be almost as buoyant as last year. The industrial growth is expected to be 7.5 per cent against 7.8 per cent in 1999-2000.

Inflationary pressures, which would surface as the economy grew at a faster rate, would be partly magnified by last year8217;s low base, analysts said. CMIE said the average annual inflation rate, based on wholesale prices, would be around 7.0 per cent in 2000/01 compared to 3.2 percent last year. Policy makers and other analysts shared the optimism overgrowth prospects.

A Reuters poll of analysts last month projected GDP growth in 2000/01 at 6.6 per cent, citing an expanding services sector and increased spending associated with elections as key factors behind the faster growth. Several Indian states go to the polls this year.

GROWTH INDICATORS STRONG: Analysts said there are indications that the growth seen in the first few months of the year would be sustained. quot;We8217;ll see continued growth in the industrial sector. Domestic demand has been sustained, except for blips in some sectors, and even on the external front, export growth has been encouraging,quot; Shubhada Rao, senior economist at rating agency CRISIL, said.

A near 30 per cent jump in exports in April and May, a 19 per cent growth in non-oil imports in those first two months of the fiscal year and a rise in non-food bank credit in the first three months compared with last year8217;s negative growth in the same period, were evidence of the momentum in the economy, they said.

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The software industry projects its exports in 2000/01 will surge 58 per cent to 6.3 billion. CMIE expected net invisible export earnings, which include software earnings and non-resident remittances, to rise to 14.0 billion in 2000/01 from 12.9 billion last year.

CMIE expects a slightly higher current account deficit this year, despite higher invisibles inflows. quot;With exports growing faster than imports and expected higher net invisibles would contain the current account deficit to 4.5 billion, marginally higher than the 4.2 billion in 1999/00,quot; it said. Net foreign capital inflows will be around 9.0 billion compared with last year8217;s 9.982 billion, it said.