The Hindu Business Line : NCAER scales back GDP growth forecast

THE National Council of Applied Economic Research (NCAER) has scaled back its pre-budget economic growth prospects from a level of 6.70 per cent gross domestic product (GDP) to range between 6.54 and 6.74 per cent now.

In its latest Macro track, released here on Saturday, the council said the prospects of the economy, which seemed bright at the turn of the new fiscal, have somewhat lost their shine.

It said the economy ended fiscal 2003-04 on a strong note with the GDP growth being estimated at 8.2 per cent fuelled by excellent agricultural growth.

Stating that the pre-budget prospect conditions had changed since then because of two major developments on the domestic front, it said first the National Democratic Alliance Government was replaced by the United Progressive Alliance Government at the Centre and second, hopes of second consecutive normal monsoons have now evaporated. It assumed that agricultural growth in fiscal 2004-05 would be lower at 2 per cent and agricultural prices would increase by 4.5 per cent.

The council said even the Union Budget 2004-05, the first major policy statement of the UPA Government, has not improved matters. Unfortunately, the internal contradictions of the ruling alliance have become sharper post-budget, it said adding that this is "causing more uncertainty on the investment climate front".

It further said the manufacturing sector would be affected in two ways. First, the demand for agricultural inputs such as fertiliser, pesticides and agricultural machinery would slip and second, the agro-base industry would suffer owing to a decline in the supply of raw material.

Another area that is likely to feel the impact of the less-than-normal monsoon immediately is inflation rate, particularly prices of food articles. A less-than-normal monsoon also meant a decline in the rural income, thereby affecting the demand for consumer goods, it noted.