Cso Scales Down Gdp Growth To 5%

The Central Statistical Organisation (CSO) has scaled down projections for growth in gross domestic product (at factor cost) to 5 per cent in 1997-98, compared with the more buoyant projections made by the government earlier.

The government had (independently of the CSO) initially projected a GDP growth of 7 per cent. By the time the busy season credit policy was presented last October, this was scaled down to less than 6 per cent.

The advance estimates released by the CSO for 1997-98 predict an acceleration in the services sector, which is expected to grow at 8.9 per cent (against 8.1 per cent in 1996-97), a slowdown in the industrial sector to 5.7 per cent (6.4 per cent) and negative growth of (-)2 per cent in the agriculture sector (7.9 per cent).

 

The services sectors share in GDP is projected to rise to 44.3 per cent (42.8 per cent), while that of the industrial sector is maintained at 31.3 per cent. However, the share of agriculture has been shaved to 24.4 per cent compared with 26.1 per cent in the previous year.

Quick GDP estimates released by the government a fortnight ago had indicated an upward revision of growth rates in 1996-97 to a record 7.5 per cent. The sequence of estimates released by the CSO for each year are advance, quick, provisional and final.

The scaling down of growth estimates is expected to affect various fiscal parameters for 1997-98 as they are linked to gross domestic product (GDP). The fiscal deficit is expressed in proportion to the GDP. As a result, even if the fiscal deficit does not change in absolute terms, the proportion could alter adversely if the denominator drops.

Finance ministry officials admitted that a drop in growth levels could have an adverse impact, but were unwilling to offer any comments as they are yet to work out the GDP at market prices. The CSO projects the GDP at factor cost.

Dont forget that 5 per cent GDP growth is based on a higher base (with 1996-97 registering 7.5 per cent). Hence, even if the growth rate drops, the absolute level of GDP will not change. Hence, the fiscal estimates need not alter, said a senior finance ministry official.

The CSOs advance estimates for the current fiscal also project a deceleration in growth in per capita net national product at factor cost. After growing at 5.9 per cent to touch Rs 2,761 in 1996-97, per capita NNP is expected to grow 3.1 per cent in 1997-98 to Rs 2,847.