The Hindu : Business : ICRA puts GDP growth at 6.6 p.c.

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Tuesday, Jul 20, 2004

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ICRA puts GDP growth at 6.6 p.c.

By Our Special Correspondent

NEW DELHI, JULY 19. The Investment Credit and Rating Agency (ICRA) has marginally raised its growth estimates for the current fiscal from 6.4 to 6.6 per cent, saying that a 7 per cent growth during 2004-05 would be an `extraordinary achievement.' In the last fiscal, that is, 2003-04, the economy recorded a robust growth of 8.2 per cent, mainly on account of a 9.1 per cent increase in agriculture.

In making its projections, ICRA has said that despite the doubts about the south-west monsoon, it could be possible that agriculture would grow somewhat, especially given the Government's initiative in pushing credit for purchase of inputs. The assessment of growth in the non-agricultural sector in 2003-04 now stands at 8 per cent, up from the advance estimates of 7.8 per cent, due to stronger income growth in all components of industry and services. The latest data on industrial output, exports and credit off-take were also supportive of continued strength in the momentum of growth in industry, especially manufacturing. Corporate results of service companies and anecdotal evidence indicated likewise for the services sector, ICRA said.

Consequently, ICRA has assumed that the non-agricultural sector would continue to grow in 2004-05 at the same pace as in the previous year, that is, 8 per cent. On that basis, ICRA has given a set of projections, depending on the growth in the agriculture and allied sectors, especially in view of the current behaviour of the monsoon. ICRA has also pointed out that while growth in gross domestic product (GDP) arising from agriculture and allied activities was 9.1 per cent in 2003-04 against a negative 5.2 per cent in the previous year.

Therefore, the get away from the troughs and rebound effect, ICRA worked out the average rate of annual growth between 2001-02 and 2003-04 at 1.7 per cent.

Therefore, ICRA's estimate is that if agricultural GDP grows one per cent in the current fiscal, overall GDP growth would be 6.4 per cent; if agriculture GDP grows 1.7 per cent, overall GDP growth would be 6.6 per cent; of agriculture GDP grows 2.5 per cent, overall GDP growth would be 6.8 per cent and if agriculture GDP grows 3.6 per cent, overall GDP growth would be 7 per cent.

However, ICRA has pointed out that the peaking output of 2003-04 of agriculture GDP in 2003-04 had registered annualised growth of 1.7 per cent over that in the previous peak crop year of 2001-02, it would be easy to appreciate that a 7 per cent growth this year on the strength of higher agricultural growth alone would be an extraordinary achievement.

About industry and services, it said that expecting these sectors to grow faster than 8 per cent would not be a very realistic expectation as per current evidence. Hence, ICRA has concluded that the GDP growth for 2004-05 would most likely be around 6.6 per cent, give or take 0.1 percentage point.

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