Exports may falter in last quarter: IEG

In line with official forecasts, the Institute of Economic Growth (IEG) has predicted an over 6 per cent industrial growth for 2003-04. It has said the inflation will be below 5 per cent in the remaining part of the financial year.

However, the monitor is forecasting a less than 5 per cent growth in exports in the remaining part of the year. The official export growth target for 2003-04 is 12 per cent.

In April-October 2003, the average export growth was 8.44 per cent and if the government is to meet its target, exports need to grow 17 per cent in the remaining months of 2003-04.

In its economic forecast for the last months of the financial year, IEG has said industrial growth will hover around 6.1 per cent in the January-March period and average 6.4 per cent in 2003-04.

The mid-term review of the economy had projected an over 6 per cent growth in the industrial sector for the fiscal.

Industrial performance will be driven by a 9 per cent growth in agriculture, which will raise rural incomes and create demand for industrial goods, and by a 20 per cent growth in non-food credit.

For 2004-05, the industrial growth is expected to be 8.6 per cent, based on the assumption of 3 per cent trend growth in agriculture and 15 per cent growth in non-food credit, the institute has said.

Despite the decline in domestic inflation and rise in commodity production, the growth in exports will be low due to the high base of last year and stagnancy in global demand, it says in its monthly review of the economy.

In it's November-December issue, IEG has said imports will grow at around 13 per cent, leading to a rise in the trade deficit.

Rising world oil prices and industrial revival will keep the import growth rate in the double digit range, the report states.

IEG has said while the recent increase in domestic oil prices might check any sharp reduction in inflation, the spurt in commodity production and expected decline in money supply growth may lead it to slip below 5 per cent for the rest of the fiscal.

The Wholesale Price Index-based inflation, driven mainly by rising prices of fruits and vegetables, edible oil and iron and steel, had touched 5.57 per cent for the week ended 13 December, while the finance ministry had said it would hover at 4 per cent for the fiscal.

Interest rates will decline marginally and the exchange rate might depreciate further, the monitor states.

Over the last three months of the fiscal, an increase in the trade deficit and rise in international exchange rates would push down the Rupee-Dollar exchange rate to 45.59, 45.53 and 45.63 respectively.