Search the Internet          Tips  Sites: Finance, Investment

Economic growth remains elusive

The Economic Survey has projected a lower GDP growth of 6% in FY 2000-01 compared to 6.4% in the previous year. At the same time, the Survey expects the industrial growth to be higher in this fiscal year, despite the fact that the period Apr-Dec 00 has witnessed a growth of only 5.7% as compared to 6.4% Apr-Dec 99. The Survey expects that better performance of mining & quarrying, electricity, gas & water supply and construction is likely to make up for the lower growth in manufacturing sector this fiscal year. However, D&B believes that current indicators do not support the optimistic projections made by the survey for industrial growth.

According to the Survey, financial, real estate and business services are expected to experience a lower growth of 9.6% in FY 2000-01 as against 10.1% in FY1999-2000. The community, social and personal services group is likely to experience the sharpest decline with a growth of only 7.6% in FY 2000-01 compared to 11.8 % in FY 1999-2000. The anticipated decline for this group is attributed to the impact of higher wages drawn by Government employees in the FY 1999-00.

Despite a normal monsoon in FY 2000-01, agriculture and allied sector is likely to grow by only 0.9%, marginally higher than 0.7% witnessed in the previous year. Production of food grains is expected to decline to 199 mn tonnes in FY 2000-01 against 208.9 mn tonnes in FY 1999-00.

The Survey has emphasised that, high inflation in terms of WPI is largely on account of rising fuel cost. If the Fuel, Power, Light and Lubricant group is removed from WPI, the growth in the resultant index will only be 2.4% till 27/01/01. The Consumer Price Index for Industrial Workers (CPI-IW) has averaged around 4% for the year 2000 compared to 4.7% for the year 1999.

The Survey expects India's Current Account Deficit (CAD) to widen to 1.5-1.7% of GDP in FY 2000-01 as compared to 0.9% in FY 1999-00. This is mainly due to the surge in the country's oil import bill. However, exports are expected to remain buoyant this fiscal year. Net inflows of invisibles are expected to remain broadly at last year's level. The widening of CAD is likely to be matched by higher net capital inflows.

Resource mobilisation in Apr-Dec 00 through public and right issues was around 26% lower than the amount raised in the corresponding period of the previous year. The subdued sentiment in the secondary market was also reflected in FII investment. Net FII investment in Apr-Dec 00 was under one-third of that in the corresponding period of 1999.

Rediff-Dun & Bradstreet Budget Impact Analysis
Economic Survey 2000-2001
Budget 2001
Money

EXTERNAL LINK:
Read the Economic Survey

Tell us what you think of this analysis