NCAER pegs GDP growth at 5.56%

Stating that 20 per cent growth in export target set in the Exim policy appears too ambitious, NCAER said export growth in 1998-99 is unlikely to be much higher than growth in world trade, which is expected to grow by 6.8 per cent in 1998. It said India’s export performance would depend not only on world trade but also on exchange rate adjustment to make Indian exports more competitive. NCAER said if policies are changed, then economic indicators like GDP, inflation, public and privateinvestment and foreign trade are likely to change.

With a policy change, real GDP is likely to touch 6.45 per cent, NCAER said. Inflation based on WPI was likely to increase to 7.28 if there was a policy change instead of a projected 6.96 per cent for 1998-99.

Ncaer expressed pessimism on fiscal deficit falling below 5.7 per cent of GDP and said current account deficit as a percentage of GDP will rise to above two per cent unless export growth picks up and imports grow slower.

In 1998-99, "an increase in public investment can push up gross fixed capital formation but there would be some crowding out of private investment," it said. It said, in 1997-98, the industrial sector saw a disappointing growth of only 5.3 per cent and only a 3.6 per cent rise in exports while agricultural production fell by 1.7 per cent with fiscal deficit rising to 6.1 per cent of the GDP.

Though the Asian currency crisis did not hit the economy too badly in 1997-98, it would put more competitive pressure on Indian exportsfrom east Asian economies.