The Indian economy will do better this year at least on paper. The gross domestic product (GDP) is likely to grow at 6.4 per cent in 2003-04, substantially higher than this year’s advance estimate of 4.4 per cent which has been taken as the base.‘‘The higher GDP growth in FY-04 is predominantly due to the low base in 2002-03 and does not represent any fundamentals ratcheting up of the growth path,’’ Crisil said. GDP to grow by 6%, inflation to fall to 5%: RBI NEW DELHI: THE Reserve Bank of India on monday expressed confidence that economy will grow by 6 per cent this fiscal compared to 4.4 per cent estimated for 2002-03, while inflation would slide to 5-5.5 per cent. “The GDP growth of 6 per cent is based on the Indian Meteorological Department’s forecast of 96 per cent rainfall in coming monsoon,” RBI Governor Bimal Jalan told reporters here. With better monsoons, he said “agriculture will rebound with 4-4.5 per cent growth.” Agriculture faltered last fiscal with a negative growth of 3.1 per cent due to the decade’s worst drought. RBI also expects the inflation to fall from July and end the fiscal at 5-5.5 per cent. “The inflation will be around 6-6.1 per cent during the first quarter. We expect it to soften in the second quarter starting from July,” Jalan said, adding the inflation was expected to end this fiscal at about 5-5.5 per cent. The assumption was based on the fall in price of international crude prices to $22-23 a barrel. Inflation was hovering at 6.17 per cent in the week-ended April 5. The prices started going up since January after the war clouds over iraq. Although the higher gdp growth and inflation forecasts would be the basis of the slack season credit policy to be announced on April 29, Jalan declined to comment on the interest rate scenario. “Wait for a few days,” he said. RBI had reduced the benchmark bank rate by 0.25 per cent to 6.25 per cent in the october busy season credit policy. RBI and government are reviewing plans to prepay foreign debts in this fiscal. “We are encouraging private and public sector companies to prepay foreign debts,” he said. (PTI) ‘‘Industry had a relatively good year, expected to grow by over 6 per cent. But this was over a low base in the previous year. Unless there is a significant acceleration in the growth drivers, the ‘base effect’ implies that there will be a slowdown this year,’’ it said. While the drivers, mainly construction, will persist during the year, there is no clear sign that they will accelerate. In addition, high oil prices will have a dampening effect, although short-lived, on industrial output.The net result is that Crisil does not expect industry to grow at more than 5 per cent during the year. The monsoon is expected to be normal and agriculture is expected to rebound sharply with a projected growth of 6.8 per cent in 2003-04, it said, adding that service and industrial sectors are expected to grow at seven and five per cent respectively.On the value of rupee, the rating agency said, ‘‘We expect a moderate depreciation of 2-3 per cent from the current levels. This is driven by slowing inflows on both the trade (slowing merchandise exports) and invisible (slowing software exports and remittances) accounts.’’This is likely to accelerate if global liquidity cycles (particularly US liquidity) turn up as this would squeeze the arbitrage margins on capital inflows into India, Crisil said.Turning to the price rise, Crisil said inflation has shown signs of resurgence in the last few weeks due to Iraq war, oil prices, poor rains pushing up primary commodity prices and the industrial recovery boosting manufacturing prices. ‘‘All these drivers will weaken in the coming months. The average rate of inflation during the year is projected in the 4-5 per cent range,’’ it added.Crisil said the exports for FY-03 would be about $ 52 billion, implying that export would meet the target of 15 per cent set by the government. ‘‘Going forward, we expect softer export growth due to the sluggishness in western economies and the overvaluation of the rupee against major competitors,’’ the rating agency said.On the yield on India securities, the rating agency said much of the Reserve Bank of India’s soft bias has been priced into bond prices. Thus a large decline from current levels looks unlikely and may further ease by 10-50 basis points.
