The feel-good factor for the economy continues as both the National Council of Applied Economic Research (NCAER) and DSP Merrill Lynch have projected a GDP growth rate of 8 per for the current financial year. While, NCAER on Tuesday revised upwards the GDP growth forecast to 7.98 per cent in 2003-04 from its earlier projection of 7.0 per cent, DSP Merrill Lynch has stated that GDP growth for the fiscal would be 8 per cent. According to NCAER’s monthly report ‘Macrotrack’, “the growth in GDP is expected to nearly reach 8 per cent during this fiscal year.” The revision in the GDP forecast comes after the economy logged a whopping 8.4 per cent growth in the second quarter and 7.0 per cent in the first half of this fiscal. According to DSP Merrill Lych second vice-president (research) Rajeev Verma, “we have revised estimates for current fiscal to 8 per cent.” NCAER said “higher growth in industry is driven by higher investment and higher demand arising from income growth due to rise in GDP originating from agriculture.” Although GDP growth would be higher, NCAER warned that fiscal deficit of the Centre is likely to be higher at about 5.82 per cent. NCAER also said the inflation rate was expected to be 4.9 per cent, which is significantly higher than 3.77 per cent predicted earlier. There was an improvement in the revenue receipts of central government even as it predicted that disinvestment proceeds this fiscal were expected to exceed the budgeted amount of Rs 13,200 crore due to the forthcoming public issue of ONGC and Gail, NCAER said. Observing the increase in non-oil imports, especially electrical machinery, NCAER said this may lead to revival of investment spending in the economy even as it cautioned that much would depend on the future prospects as also the policies guiding the economy. However, it said corporate financial figures suggest that the current industrial upturn may last longer. It noted that the upsurge in the stock market, which has not been witnessed in the past, was also an indicator of the rising business confidence, but said in spite of the buoyant expectations, the latest business confidence survey failed to reveal any improvement in the investment climate. According to DSP Merrill Lynch, country’s growth rate would peak to 8.8 per cent in 2005-06 and would attract dollar investment in infrastructure in next three years. Turnaround in the investment cycle, sustained buoyancy in consumption demand and supportive macro level factors would drive high growth in the GDP. The strong momentum in services and good monsoon in this fiscal would feed into a higher industrial growth in 2004-05, DSP Merrill Lynch said. According to Verma, the economic growth rate is expected to peak at 8.8 percent in 2005-06 and in the following year, it would show a slight decline at 8.3 per cent growth.
