Economy to accelerate 8.9% this year: NCAER
High investment level, expanding consumer demand and policy stimulus is expected to boost the country’s GDP growth rate to 8.9% during 2008-09, economic think-tank NCAER said on Tuesday
By TNN |
NEW DELHI: High investment level, expanding consumer demand and policy stimulus is expected to boost the country���s GDP growth rate to 8.9% during 2008-09, economic think-tank NCAER said on Tuesday. The estimate is higher than the projections of the Reserve Bank and the government. The minimum growth level would be 8.5% if external shocks slow expansion, the research body���s latest review of the economy says.
The duty cuts announced in the 2008 Budget and last week���s anti-inflation drive would spur growth, the study feels. Implementation of Sixth Pay Commission���s recommendations on salaries of government employees would boost consumer spending and emphasise the argument about India���s growth being predominantly driven by internal demand, it has been argued.
RBI had projected a growth rate of 8-8.5%, while the government had estimated GDP expansion during the current fiscal to be around 8.5%. NCAER forecast is thus far the best confidence vote for the India Growth Story which was in doubt due to global slowdown.
NCAER, however, has cautioned that global factors such as rising commodity prices and possible recession in the US could moderate growth. ���On the lower side, the economy is projected to grow at 8.5% as the short-term prospects are less attractive than a year earlier due to rising inflation and fears of slowing down. However, as investment scenario is healthy, in the more comprehensive case, GDP growth is projected at 8.9%,��� it said.
Interestingly, the think-tank���s study has some good news on the inflation front too. Increase in real prices of food items was lower in 2007-08 as compared to 2006-07, it has been emphasised. Milk, dairy products, vegetables and edible oils were the only items which witnessed higher inflation.
In what should sound as music to the government���s ears, the report says actual stock of rice and wheat in the central pool stood at 19 million tonnes as on April 1, 2008 as compared to 16.2 million tonnes at the beginning of 07-08. The stock position of rice at 13.5 million and wheat at 5.5 million has been described as comfortable, providing confidence to government trying to douse the inflation fire. However, it has been pointed out that improvement in productivity would be the key to meeting food demand in the long term.
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The report projected inflation at 4.9-5.2% for 2008-09 as compared to 4.4% last year. The government has been in an overdrive over the past few weeks to rein in prices. Data released last week showed inflation was at a 42-week high of 7.57%.The report says the government would be able to keep the fiscal deficit within 3% despite the high subsidy outgo. The targets set out in the Fiscal Responsibility and Budget Management Act are within reach, thanks to strong growth in tax collection.
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