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GDP growth pegged at 8.9 p.c.

Special Correspondent

EAC advocates relief package for labour-intensive industries

NEW DELHI: The Prime Minister’s Economic Advisory Council headed by C. Rangarajan on Thursday pegged its growth projection for the current fiscal a tad lower at 8.9 per cent from 9 per cent estimated earlier, mainly on account of slowdown in manufacturing and low growth in energy generation.

In its ‘Review of the Economy 2007-08’ released here at a press conference by Dr. Rangarajan, the council said: “Our current assessment for GDP growth rate in 2007-08 is marginally lower than our previous estimate in July 2007. The main difference stems from lower than expected expansion in manufacturing output and lower growth in the output of energy utilities.”

Coming to the rescue of the country’s economy was a better-than-expected growth rate witnessed by the farm sector during the year which went on to partially neutralise the negative effect of the lower expansion rate in manufacturing and energy sectors.

“The agriculture sector is likely to grow by 3.6 per cent as against the earlier estimate of 2.5 per cent,” Dr. Rangarajan said.

The GDP growth during the fiscal year could have been higher but for the fact that the manufacturing sector growth is likely to decelerate to 9.8 per cent as compared to a robust growth of 11.3 per cent projected by the EAC in its ‘Outlook’ released in July 2007. In 2006-07, the sector had posted a growth of 12.3 per cent.

It was owing to the steady decline in manufacturing sector growth, consumer goods in particular, that Dr Rangarajan had advised Finance Minister P. Chidambaram to revise downwards the rates of indirect taxes on consumer durables so as to spur the economy, especially when it is expected to slow down further to 8.5 per cent during 2008-09, mainly owing to external sector considerations.

Turning to the external sector’s impact on the economy, the EAC advocated the need for some relief packages for labour-intensive industries in particular, as the rupee is expected to appreciate further against the U.S. dollar.In the current scenario, clear signals should be given to the domestic industry to make adjustments by way of productivity increases and by tapping the booming market at home, it said. This would offset much of the negative impact as the growth rate of exports this fiscal is expected to fall to 22 per cent from 26 per cent recorded in 2006-07.

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