GDP growth at 8.1 pc for 2008-09: RBI survey

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{image-inflation+rbi_10052008.jpg}Mumbai, May 10: Forecasters survey carried out by Reserve Bank of India (RBI) pegged real GDP growth for the current fiscal at 8.1 per cent, weaker than 8.9 per cent projected three months ago and the inflation between 5.5 and 5.9 per cent.

The third round of the survey, released by RBI indicated the real GDP growth in first and second quarter is projected at 8.1 and 8.3 per cent. During the third quarter of current financial year, the GDP growth is placed at 8.1 per cent. The forecasters saw lower chance (25 per cent) that WPI inflation will fall in the range 5-5.4 per cent against their earlier forecast of 38 per cent. The probability assigned to the range of 5.5 to 5.9 per cent has been revised upwards from 15 per cent in the earlier survey to 19.3 per cent in the current survey.

Median forecasts for real GDP originating from agriculture, industry and services sectors in first quarter of 2008-09 are kept at 3, 8.4 and 10.0 per cent respectively. These projections were down from 3, 9 and 10.3 per cent respectively, in the last survey.

For the second quarter also, the sectoral growth forecasts have been revised downwards. For the third quarter of current financial year, the forecasters have kept the growth rates at 2.9, 8.6 and 9.8 respectively.

The survey was the third 'Survey of Professional Forecasters' on major macro-economic indicators of short to medium term economic developments carried out by RBI to gain from the professional expertise and experience of these forecasters. The Reserve Bank has also introduced such a survey from the second quarter ended September 2007 covering component-wise detailed forecasts of GDP growth, inflation, savings, capital formation, consumption expenditure, export, import, interest rates, Forex reserve, money supply, credit growth, stock market movements and corporate profit.

Long term forecasts for real GDP during the next five years is projected at 8.5 per cent and 8.9 per cent for the next ten years. Over the next five years, the forecasters expect WPI inflation to be five per cent, which is revised upwards from the last survey. CPI-IW inflation will average to 5.5 per cent, same as expected in last survey. Over the next ten years, the WPI and CPI-IW-based inflation are expected to be 4.5 and 5 per cent respectively.

Real GDP originating in agriculture, industry and services sector for the year 2007-08 have been revised to 2.6, 8.8 and 10.6 per cent. The growth rates were forecast to be 3.4, 9.3 and 10.1 per cent in the earlier survey. For the year 2008-09, these sectors are expected to grow at a rate of 3.0, 8.1 and 9.7 per cent respectively, which is lower than the earlier forecasts of 3.1, 9.1 and 9.9 per cent respectively.

The survey revealed that the Indian economy was expected to be driven by domestic demand in 2008-09 with gross domestic capital formation to contribute 36 per cent to real GDP in 2008-09, while contribution of gross fixed capital formation is expected to be 33.8 per cent. The proportion of domestic saving to GDP is indicated to be at 35 per cent in 2008-09 which is same as the forecast of last survey. The forecasters continue to expect growth rate of sux per cent in private final consumption expenditure.

The forecasters have revised profit growth of corporate sector downwards in 2008-09. Profit after tax is forecast to grow at a rate of 24.7 per cent in 2008-09 as against 34 per cent expected in last survey.

Broad money (M3) was expected to grow at a rate of 19 per cent in 2008-09 which is higher than its previous estimate of 18 per cent.

The bank credit is expected to slow down to 20.3 per cent in 2008-09.

One of the key deficit indicators of central government finances namely, fiscal deficit was expected to be 3.2 per cent of GDP in 2008-09, whereas the combined gross fiscal deficit is placed at 6 per cent of GDP.


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