GDP growth not to cross 4.5 pc: CMIE

MUMBAI, JAN 13: The Centre for Monitoring Indian Economy (CMIE) has estimated that the 4.5 per cent growth in GDP (gross domestic product...

MUMBAI, JAN 13: The Centre for Monitoring Indian Economy (CMIE) has estimated that the 4.5 per cent growth in GDP (gross domestic products) of the country expected this fiscal is likely to continue during 1999-2000 as well. It has also revised downwards the industrial production growth with the corporate sector showing lower sales and profits.

The Reserve Bank of India (RBI), it may be recalled, had recently said a GDP growth of 6 per cent in 1998-99 has become bleak due to lower industrial growth. The GDP growth target for the year (1998-99) is 6.1 per cent as against the growth of 5.1 per cent in 1997-98.

After three years of seven per cent growth, from 1994-95 to 1996-97, growth in the Indian economy slipped to less than five per cent and CMIE believes it would not be more than 4.5 per cent this fiscal.

Story continues below this ad

It said growth in agricultural production has been estimated at 1.5 per cent, industrial production at around four per cent and services marginally higher than six per cent. “We believe that the economy will expand not more than 4.5 per cent in 1998-99, the second consecutive year to record such a level of growth,” CMIE stated in its monthly review of the Indian economy.

India’s industrial output was likely to grow by four per cent in 1998/99 against 4.5 per cent projected earlier. "Projections for industrial output were revised downwards from 4.5 per cent to 4 per cent," the CMIE said.

Prospects for 1999-2000 are not encouraging either, with agriculture projected to grow by only two to three per cent depending on the distribution of rains in the next season. Foodgrains production was expected to grow by 0.3 per cent and non-foodgrains production by 3.1 per cent, it said.

Investment proposals have also been declining and there are no indications of a reversal of this status in the coming months, it said, adding that competition from cheap imports would continue to plague the domestic industry and the industrial sector is not likely to grow by more than five per cent in the coming year.

Story continues below this ad

However, if next year’s crop is extraordinary and investments pick up substantially, growth rates may increase to 5.8 per cent, it added.

Further, CMIE maintained its 1998-99 fiscal deficit at 6.6 per cent of GDP on lower revenue collections and higher government spending. Government spending had increased by 29 per cent during the year which was the highest in recent years, it said.

However, CMIE lowered its 1998-99 inflation forecast based on the wholesale price index (WPI) to 7.5 percent from 8 per cent, while the forecast based on the consumer price index (CPI) was raised to 13 per cent. The study further said that an analysis of the country’s corporate sector results indicated a trend of declining sales and falling profits.