NCAER pegs India's growth at 6.7%

The country's Gross Domestic Product (GDP) is expected to grow by 6.7 per cent during 2004-05, according to the National Council of Applied Economic Research (NCAER).

The Monthly Report of NCAER says though the industrial sector will remain buoyant in 2004-05, there would be a deceleration in its growth rate as compared with last year.

It has argued that after a robust growth rate of 9.4 per cent by agriculture in the first three quarters of 2003-04, its rate of growth will decelerate to 3 per cent in the new fiscal.

As a result, industrial growth will slip to about 6.8 per cent mainly due to demand contraction from agriculture.

Similarly, investment will also slip because of a fall in demand. On the positive side, the average whole sale price index is expected to grow at 4.3 per cent in 2004-05.

The report expects the fiscal deficit of the Centre to therefore worsen to 5.3 per cent, against the projected 4.3 per cent by the finance ministry.

The think tank has projected that despite an appreciating rupee, exports will still grow by about 8.1 per cent. "On the other hand, a stronger rupee would lead to more buoyant imports with a projected growth of 15 per cent in dollar terms", the report says.

Thus the trade balance with a stronger rupee will lead to a trade deficit, but the current account deficit will remain marginally positive.

The projections made by NCAER are based on the latest reports from the department of meteorology, that it will be a normal monsoon year and there will be no change in the average indirect domestic tax rates.

The Business Confidence Index of NCAER has scaled a new high of 138.1 in its quarterly business expectations survey of January 2004. This is 8.7 per cent more than that recorded in October 2003, and the highest since December 1995.

But breaking down the overall BCI projections in to sectors show, that while the upswing in business sentiment is visible in services and in intermediate and capital goods, the same is not evident in consumer durable and non durable sectors.

The report says it has analysed whether the massive jump in GDP growth rate and the spike in BCI has made any difference to the sales of firms. While about 41 per cent of the firms surveyed report that there has been an increase, 46 per cent say that their sales dipped.

Also most firms have reported that their current push in sales had come primarily from domestic demand.