Dip in growth rate seen

GDP growth seen falling below 8% target in FY05

While economic growth projections for 2003-04 are fairly close to the targeted rate of 7.3 per cent, a majority of economists feel the Plan estimates for 2004-05 are unlikely to be met.

In 2004-05, the third year of the Tenth Five Year Plan, the country's gross domestic product (GDP) is expected to grow only 6-6.5 per cent as compared with the Plan target of 8.1 per cent.

The high base effect of the robust growth experienced in 2003-04 will pull down growth figures in the next fiscal.

Improved coverage and good agricultural performance would push up economic growth to 7.8 per cent this fiscal, said ICRA Economic Adviser Saumitra Chaudhuri.

Arvind Virmani, director, ICRIER, predicts 7-7.5 per cent GDP growth in the current fiscal. Crisil Chief Economist Subir Gokarn is also confident of more than 7 per cent growth.

BB Bhattacharya, going by the annual growth model of the Institute of Economic Growth, projects 6.8-7 per cent growth for 2003-04.

The farm sector, which grew spectacularly this year because of a good monsoon, will show a dip in growth in the next.

"Agricultural growth will be less than 3 per cent in 2004-05," said Virmani. On the whole, he expects the economy to clock 6 per cent growth in 2004-05.

An estimate Bhattacharya agrees with. "Six per cent is reasonable for next year," Bhattacharya said.

According to Chaudhuri, the 12 per cent growth in trade, hotels, transport and communication in the second half of 2003-04 is partly because of improved coverage.

This cannot continue in perpetuity, he says. Moreover, the dip in agriculture will send growth figures spiralling downwards next year.

Virmani, however, said this segment would drive growth in the next fiscal also.

"Telecom is a big part of high growth in this segment and the growth momentum will be carried to the next year," he says.

However, it will not be able to pull the economy above the 8 per cent growth targeted in the Plan document.

Compared with the Tenth Plan target of 6.7 per cent growth in the first year "" 2002-03 "" the actual GDP growth was only 4.3 per cent.