New Delhi: Economic think-tank NCAER on 10 August raised the forecast for the country’s economic growth in this fiscal to 8.53% in the backdrop of good corporate performance and expectations of higher farm sector growth.
“The revised forecast places overall real GDP growth at 8.53% as compared to the previous forecast of 8.3%. Higher growth has been largely due to agriculture and industry,” NCAER said in its quarterly review.
Expectations of better monsoon and impact of higher capital inflows have led to higher growth estimates for these two sectors, it said.
NCAER’s revised estimate comes days after International Monetary Fund raised the GDP forecast to 9% in 2007. While RBI expects economy to grow at 8.5%, the Economic Advisory Council to the Prime Minister has pegged the economic growth rate at 9% in 2007-08.
According to NCAER, agricultural production outlook for 2007-08 has improved, thanks to expectations of a better monsoon than last year. The weighted average index of rainfall during June-July 2007 is 18% above normal, against 8% for the same period in 2006.
Growth estimates in all three components of GDP — agriculture, industry and services — were revised upward for the current fiscal.
The farm sector is expected to grow at 3.35% against 2.6% earlier estimated, while industry is poised to grow at 9% against 8.7%. The services sector is expected to log a growth of 10.09% against a previous estimate of 9.9%, it added.
Commenting on the growth momentum, the think-tank said while higher inflation rate, stronger rupee and tight money policy have been hurdles from the perspective of accelerating economic growth, they have not yet slowed the pace of growth.
Besides, the NCAER report said the projected fiscal position of the government is close to Budget expectations.
“On external balances, we are now projecting a current account deficit of 1.8% of GDP as against the surplus that we had anticipated in our April projections,” it said. The reason for this change is the lowering of projected rise in net invisibles, it added.
The report says inflation will be a concern this year as well. The forecast for wholesale price-based inflation has been raised from 5.3% to 5.11%.
RBI hopes to keep inflation close to 5% this year. The inflation rate has climbed to 4.45% for the week ended 28 July, according to official data released on 10 August.
Low inflation on the oil prices front was expected to be a salutary factor, but there has been a setback here recently. Global crude oil prices are climbing again, it said.