Ncaer Pegs Growth Of Real Gdp At 7.2%

India's real gross domestic product (GDP) is projected to grow by 6.4 per cent to 7.2 per cent in 2000-01 according to the National Council for Applied Economic Research (NCAER).

But the growth is contingent on good performance of agriculture, and on the level of capital inflows, according to the Review of the Economy released by the institute.

For the coming year, the economy's performance will be affected by the expectations of improved output and trade performance at the global level, says the review. Expected moderation in crude oil prices in the international markets will provide some stability to India's external balance.

 

These factors also suggest improvement in the capital flows into India, particularly with respect to direct foreign foreign investment, it adds.

Given the stability in crude oil prices and improved capital inflow scenario, pressures on exchange rate would also be moderate. These factors imply inflationary expectations would be mainly from setbacks on the domestic front that may arise from temporary supply shocks such as an unfavourable monsoon, the review states.

The overall inflation rate, reflecting the Consumer Price Index is projected to be about 4.5 to 5 per cent. Trade and current account deficits are projected at 2.5 per cent to 2 per cent with the exchange rate assumed to register a depreciation of 5 per cent.

Further reduction in nominal interest rates may be limited, however improvement in capital market conditions can open up the scope for equity issues and help in financing new investments, according to the review.

Continued large fiscal deficits however affect the investment climate adversely directly by reducing the governments ability to make investments in the infrastructure sector and indirectly, by raising the cost of funds needed for private investment.