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NCAER pegs GDP growth at 7.8% for FY06

Economic think-tank NCAER says that GDP growth will be lower at 7.8% despite impressive performances from industry and services.

india Updated: Feb 09, 2006 18:32 IST

Within days ofGovt'sprediction of 8.1 per centandIndia Inc's7.7 per centGDP growth during 2005-06, economic think-tank NCAER said the growth will be lower at 7.8 per cent despite impressive performances from industry and services.

In its final estimate of GDP after taking into account the latest domestic and global developments, NCAER said "the Indian economy will grow at 7.8 per cent (1993-94 prices) in 2005-06."

Agriculture is slated to grow by 3.4 per cent, while industry will log 8.0 per cent and services 9.3 per cent, it said in its 'Quarterly Review of the Economy'.

"This would be the first year in India's post independence history when GDP growth would touch 8 per cent mark without a substantial contribution from agriculture. In all previous years, 8 per cent (or higher) GDP growth was achieved only when accompanied by double-digit GDP growth in a riculture," it said.

In October 2005, NCAER had projected a growth rate of 7.6 per cent. However, it revised the figures after CSO changed the base year.

"A quick calculation of conversion of base year of GDP estimates suggests that our 7.8 per cent growth in 2005-06 at 1993-94 base would be equivalent to 8.0 per cent growth in 2005-06 at 1999-00 prices," it said.

On the fiscal situation, NCAER said, "we expect that there could be slippage of around Rs 4,000 crore in tax collection and fiscal deficit for the year to be around 4.4 per cent, which is higher than anticipated in the Budget document."

Thanks to profitable public sector firms agreeing to pay special dividends to the government and better growth, the slippage is small, it added.

Despite appreciation of real effective exchange rate (REER) and decline in exports in November 2005, NCAER said export growth during April-December has been a healthy 18 per cent and Imports grew at 27 per cent during the same period.

Oil and non-oil import growth has been 20 and 45 per cent respectively.

The higher import growth compared to export growth has resulted in the current account deficit in first half swelling to $13 billion, it said.

"The current account deficit will therefore be around 2.8 per cent of GDP. Exports are expected to grow at 19.5 per cent and imports 23.9 per cent," it said.

Foodgrain production this fiscal is expected to be below the fiscal target of 215 million tonnes at 207-214 million tonnes, up from 205 million tonnes last year.

"Average inflation rate is expected to be 5.3 per cent," NCAER said referring to rise in price index of primary articles since August 2005.

High oil prices are mainly responsible for the persistent 9 per cent of more inflation in the energy component, it said.

First Published: Feb 09, 2006 16:14 IST