NCAER too cuts GDP target by 0.5 percentage points to 5.9%

Think tank says fiscal deficit to widen to 5.7% for 2012-13

Economic think tank National Council of Applied Economic Research (NCAER) joined others to lower India's growth forecasts. It pegged GDP growth at 5.9% for 2012-13 against earlier estimates of 6.4%. It disagreed with Finance Minister P Chidambaram's optimism of reining in fiscal deficit at 5.3% of GDP for the current fiscal, and projected it to widen to 5.7%.

Service sector has been the growth driver so far, but NCAER said, “one of the main drivers of this sector, telecommunications has been affected by policy dilemma”.

In its quarterly review of the economy, it estimated the average wholesale-price inflation at 7.4% in the current financial year on the back of increase in domestic oil prices.

The economic think-tank also downgraded export growth estimate to 7.9% for 2012-13, sharply lower than its earlier estimate of 17.2%. The report said that India’s export performance has turned out to be much worse than for emerging and developing economies as a group.

With slower industrial growth, imports have also slackened. In the first half of 2012-13, India’s imports declined 7% over the same period last year.

While the Finance Minister stayed firm on containing fiscal deficit at 5.3% of the GDP, NCAER pegged it at 5.7% of the GDP, which is nearly the same as 2011-12.

It said that the recent increase in diesel price and limiting distribution of subsidized LPG will reduce outgo on meeting under-recoveries of the oil companies this year, but “we need a longer term approach to sustainable pricing of petroleum products”.