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NEW DELHI, Jan. 8

THE National Council of Applied Economic Research (NCAER) has forecast the current fiscal economic growth rate between 4.9 to 5.2 per cent, against its earlier projection of 4.8 per cent for 2002-03 made in September, 2002. The revision needs to be viewed against last year's actual performance of 5.39 per cent.

In its latest quarterly review of the economy and monthly macro track, released on Wednesday, the Council said the revision in GDP forecast is warranted by the revision in the assumptions pertaining to exchange rate and prices for 2002-03.

Thus depreciation of the rupee vis-à-vis the US dollar by 3 per cent; increase in agricultural prices by 4 per cent and domestic petroleum product prices to increase by 5 per cent; besides, export growth is now specified at 15 per cent in dollar terms, it said.

The Council said that while agricultural output is projected to grow between zero and one per cent, industrial output including construction, mining and power sectors is projected to grow by 6.5 to 6.6 per cent. Services sector excluding construction is projected to increase by 6.9 to 7.1 per cent.

In the case of services sector, the buoyancy in housing loans, expansion of telecom services as well as expanding insurance business sustained the financial sector growth.

The average price level reflecting the producer prices (WPI) is projected to increase by 3.4 to 3.7 per cent. Gross fiscal deficit of the Centre is projected at 5.9 per cent of GDP at market prices.

The Council still projects a current account deficit of 1.5 per cent of GDP with the exports projected to grow by15 per cent and imports by 10 per cent.

Referring to recovery of the industrial sector this fiscal, the Council said indications of turnaround in industrial recovery is to be laced with risks associated with the poor agricultural harvest and the volatility in petroleum prices on account of dangers of conflict over Iraq.

Two important features of the economy that have imparted a measure of stability in the face of global uncertainties of last year and the poor agricultural conditions of this year include the large foreign exchange reserves exceeding $60 billion by mid-December and the foodgrains stocks with the Government that stood at over 50 million tonnes at the beginning of October, 2002.

On the issue of high forex reserves, the Council said the key lies in managing deployment of these reserves. It said while judging the adequacy of reserves, the issue today is not only the need for financing current account imbalances but also India's capital accounts.

The build-up of reserves has been strengthened by borrowings from NRIs, it said adding that given the greater foreign investment inflows, are these debt flows still important for the country.

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