Gdp Growth Projections For 97-98 Being Scaled Down

Estimates of growth in gross domestic product in 1997-98 are being scaled down to around 5 per cent compared with initial projections of 6 per cent, even as the government comes to terms with the record growth of 7.5 per cent notched up in 1996-97.

Significantly, the government had initially projected GDP growth of 7 per cent in 1997-98. This was scaled down to less than 6 per cent by the time of the presentation of the busy season credit policy in October 1997.

Confirming the further revision, top government officials said the record growth achieved in 1996-97 which was revealed on February 6 when the Central Statistical Organisation issued revised estimates has automatically deflated targets as the comparisons are now against a peak.

 

Further, the performance of the agriculture sector in the current fiscal year is in doubt notwithstanding buoyant results in animal husbandry and fishing with the kharif harvest witnessing a 2 million tonnes shortfall in foodgrain production. Only a record rabi crop, which is not expected so far, could reverse this downtrend.

Officials pointed out that even in 1996-97, it was the sharp upward revision in agriculture sector estimates that forced the CSO to revised the advance GDP estimates of 6.8 per cent to 7.5 per cent. The growth in this sector in 1996-97 was revised from 3.7 to 7.9 per cent.

Subsequently, the government has prevailed upon the CSO to stop making advance estimates. As a result, this years release of quick estimates for 1996-97 did not carry the normal projections.

However, both the finance ministry and the Reserve Bank of India make internal projections of GDP growth. These are used to make the necessary computations on various macroeconomic aggregates like money supply.

The downward revision of growth expectations has its own consequences for macroeconomic projections. Senior government economists aver that with money supply growth of around 16 per cent projected at a GDP level of 7 per cent, lower growth would imply the build-up of a liquidity overhang.

Similarly, several other aggregates like the fiscal deficit, which are pegged to GDP growth, will undergo revisions with the change in the growth rate. The government is compiling the various economic estimates for the year-end at present. A clearer picture will emerge only by the time of the presentation of the vote-on- account by the month-end.