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Journalism of Courage
MUMBAI, Oct 27: The National Council of Applied Economic Research NCAER has revised the gross domestic product GDP growth rate forecast for fiscal 1998-99 to 5.7 per cent from the earlier pre-monsoon projection of 5.5 per cent.
Higher GDP forecast, according to the NCAER, would be possible because of increased growth of services sector as revealed by the recent figures released by the Central Statistical Organisation CSO. This to some extent was also on account of the Fifth Pay Commission recommendations.
The NCAER review also pointed out that domestic conditions have, quot;improved somewhat in the second quarter as capital flowed in through RIBs, the rupee stabilised, and there was relatively less political uncertainty.quot;
However, on the other side, various negative factors would mar the performance of economy during the current fiscal. NCAER expects that fiscal deficit would remain high and inflationary pressure would strengthen. Export growth too was not likely to go up and industry would continueto do badly.
According to the council, fiscal deficit as percentage of GDP was expected to be 5.8 per cent, up from 5.78 per cent in the July forecast. This will be both due to higher public expenditure on account of inflation and revenue targets not being met. Depressed stock markets at home and abroad indicate that the target of public sector disinvestment of Rs 5,000 crore will not be met.
Inflation is forecast to be at a high of 8.4 per cent mainly due to a 9 per cent growth in agriculture prices as well as higher money supply.
Based on the current monsoon information, NCAER estimates that agriculture will grow by 3.4 per cent as compared to a fall of 1.7 per cent in 1997-98. The agriculture growth rate forecast, however, is down from the July forecast of 3.4 per cent.
It was pointed out that fear of a global recession, higher domestic prices and risk of further depreciation of East Asian currencies have further lowered expectations of export performance. As against the earlier forecast of 4 percent, the council expects export growth rate of only 1.2 per cent during the current fiscal. Export growth last year was 3.6 per cent.
Industrial growth rate for the current fiscal, according to NCAER, was expected to be 5.2 per cent. This was down from the July forecast of 5.5 per cent. Industrial growth last year worked out to be 5.8 per cent.
The council has also forecast deterioration in the current account balance to - 2.27 per cent from - 2 per cent recorded last year. Also share of private investment in GDP is expected to be lower at 23.3 per cent compared to 23.7 per cent last fiscal.
However, the Business Confidence Index BCI has improved in September after it had dipped sharply in June. According to NCAER, relatively lower political uncertainty and the inflow of foreign capital and no major crisis in the second quarter helped to improve business sentiment. In the first quarter confidence had plunged to record low levels in the aftermath of the nuclear explosions, economic sanctions and athreat to political stability.
