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Business News/ Politics / News/  Diverse growth forecasts reflect uncertainty in economy
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Diverse growth forecasts reflect uncertainty in economy

Diverse growth forecasts reflect uncertainty in economy

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That was entirely expected, given the dramatic turn for the worse taken by the economy since the survey was last conducted in September. But one would have expected that, since the latest survey was conducted recently, the range of estimates for 2008-09 would narrow. Normally, forecasters would have a good idea of what this fiscal’s numbers will be like. Instead, the range of estimates has gone up quite sharply in the case of most indicators. The mean and median estimates of growth have come down, as is completely natural, but the difference between the maximum and minimum forecasts has increased significantly. That is probably yet another indication of the high levels of uncertainty prevailing in the economy at present.

Also See Varying Indicators (Graphic)

For example, RBI survey’s fifth round, held in September, forecast a maximum growth of real GDP of 8%, while the minimum level forecast was 7%. But in the sixth round of RBI’s survey held recently, the range between the minimum and maximum forecasts has increased to 5.8% to 7.8%. Although it’s rather surprising that there are some forecasters out there who still believe we’ll have GDP growth of 7.8% this fiscal, the increase in the range of forecasts indicates heightened uncertainty.

The same trend holds true for most of the other indicators. For instance, bank credit growth in 2008-09 is now expected to be between 18% and 26%—this range was between 18% and 24% when the last survey was conducted. Corporate profits after tax are now estimated to be between 8% and 26%, compared to between 15% and 26% at the time of the last survey. Similarly, the dollar/rupee rate is now forecast to be between Rs45 and Rs52 at the end of the fiscal, while the last estimate was between Rs42 and Rs47. In many instances, however, what seems to have happened is that while the minimum has come down, there are apparently some forecasters out there who are sticking to their guns and not changing their bullish forecasts. In that case, perhaps all that the survey shows is that some forecasters continue to be delusional.

Write to us at marktomarket@livemint.com

Graphics by Paras Jain / Mint

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Published: 06 Feb 2009, 11:00 PM IST
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