NCAER, CMIE cut growth forecast

NEW DELHI: Economic think tanks National Council For Applied Economic Research (NCAER) and Centre for Monitoring Indian Economy (CMIE) on Thursday slashed the country���s GDP growth projection for this fiscal. While NCAER cut the growth estimate to 7.6% from its earlier forecast of 7.8%, CMIE reduced its GDP growth forecast to 8.7% from 9.4% earlier.

���Our downward revision comes at a time when the financial markets are in turmoil. However, our revision is not entirely because of the turmoil,��� CMIE said. The revision reflects some stress in the real-estate sector and a slowdown in the implementation of investment projects, it said.

NCAER is cutting its estimate for the second time this year from 8.5-8.8% made in May. According to NCAER, the lowering of growth expectation is due to high inflation, slack in consumer demand and the global financial market meltdown. ���Taking into account changes in the key parameters of the economy since the previous forecast we have revised our projections for the fiscal 2008-09,��� it said. This forecast came after the Reserve Bank and central government���s steps to infuse liquidity into the system.

The report said: ���The impact of two recent external shocks on the economy ��� high crude oil prices and the financial market crisis ��� implies a higher inflation rate and slower growth. The effect of the financial market crisis on the supply of credit and liquidity has been more intense than anticipated.��� The report expects industrial growth at 8.2% in current fiscal year, lower than 8.6% in the last fiscal. But farm output is expected to be higher by 2.3% in the year even with a normal monsoon.

NCAER expected inflation to average 7.8% this fiscal compared with 4.4 % in the last fiscal. It pegged fiscal deficit at 3.6% of GDP in the current fiscal, higher than the government���s target of 2.5%. NCAER���s prediction is lower than 7.7% forecast of the Prime Minister���s Economic Advisory Council and 8% estimated by the Reserve Bank. During the first quarter of the current fiscal, the economy registered a growth of 7.9%. However, industrial growth crashed to 1.3% in August, raising fears that overall growth may be impacted.