CMIE maintains GDP growth forecast at 5%

CMIE maintains GDP growth forecast at 5%
EEB/AGENCIES

MUMBAI, FEBRUARY 9: Independent research firm the Centre for Monitoring Indian Economy (CMIE) on Wednesday retained its forecast for India's GDP growth at 5 per cent for 1999/2000 (April-March). This is in direct contrat with government-run Central Statistical Organisation (CSO) forecast which said the GDP will grow by 5.9 per cent in the current financial year which ends on March 31.

The effects of a decline in agricultural output and a slowdown in investments could affect industrial production in the second half of the current year.

"Although cement, steel and non-ferrous metals fared well during this period, there are indications of a lower pace of growth suring the second half of the financial year," the independent forecaster said in its February report.

"For the year we expect to see index of industrial production (IIP) to grow by 6.0-6.5 per cent," it said. The country's rabi or the summer crop was expected to report a shortfall on account of a decline in output of rice and pulses, CMIEsaid.

But its estimate of a 1.2 per cent decline in agriculture remained unchanged. CMIE also maintained its earlier projection that the country's inflation rate measured by the wholesale price index will be 3.5 per cent. It also retained the current account deficit balance targetat $5.5 billion and said the deficit will comprise 1.2 per cent of the GDP.

According to analysts, the country needs an annual economic growth of above eight per cent to keep ahead of the demands of its burgeoning population, now around one billion.

CMIE projections are completly in contrast with the data recently released by the Government's Central Statistical Organisation (CSO) which showed that India's gross domestic product (GDP) is estimated to have grown by 6.8 per cent in 1998/99 (April-March), up from five per cent in the previous year.

Last Friday, Sinha had said the government had run out of soft options and the 2000/01 federal budget, due on February 29, would show that it was prepared to take hard decisions.Analysts say the government will have to take tough steps if it is to rein in its fiscal deficit.

The federal government has set a fiscal deficit target offour percent of GDP, down from 4.5 percent in 1998/99, but analysts say it is unlikely to meet it.

Analysts say the target will be missed because of the costs of a 10-week battle last year with armed intruders in Kashmir, expenses incurred in rehabilitating and rebuilding the eastern state of Orissa after it was ravaged by a cyclone in October, and higher wages and pensions to government staff following the Fifth Commission report .

They estimate the combined deficits of state and union governments, plus losses of public sector units, at around eight to nine per cent of GDP.