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NCAER marginally ups 2000-2001 GDP estimate to 6.2%

One of India's leading economic think-tanks has marginally upped its 2000-2001 economic growth estimate to 6.2 per cent from an earlier forecast of 6.1 per cent.

The National Council for Applied Economic Research (NCAER) said in its quarterly review issued on Friday the slight upward revision was due to growth in the services sector and a sustained improved export performance.

It follows the government's estimate released last week of six per cent growth for the fiscal year 2000-2001 (April-March).

Earlier in the year, Prime Minister Atal Bihari Vajpayee said that the government was targeting growth at 6.5 per cent or higher. Growth was 6.4 per cent in 1999-2000.

The Reserve Bank of India, whose initial estimate for 2000-2001 growth was 6.5 to 7.0 per cent, has since scaled back its forecast to 6.0 to 6.5 per cent.

NCAER boosted its estimate of services sector growth, excluding construction and transportation, to 7.7 per cent from an earlier forecast of 7.47 per cent.

"The improvement in the growth of the services sector is essentially due to the higher demand for domestic output of services as imports have slowed down," it said.

The review said the sustained growth in exports in the first eight months of the current fiscal year suggested overall similar growth for the full year.

Remain depressed

NCAER said agriculture output would remain depressed in the case of winter foodgrains and sugarcane. However, cotton output was expected to be higher.

NCAER called in the report for a strongly growth-oriented budget for 2001-2002 and urged steps to bring back a "feel-good" factor into the economy.

Finance Minister Yashwant Sinha is to present the federal budget for 2001-2002 (April-March) on February 28.

The review proposed a cut in tax rates, saying it would increase spending and spur overall growth.

"If the rate was decreased and the tax rebate was invested, there would be an increase in real GDP growth. While the loss in government revenue does imply higher deficits, the additional growth also improves tax collection," NCAER said.

The review said fiscal incentives to improve the investment climate were vital to kick-start the slowing economy.

A cut in tax rates would be a better way to boost growth than increasing government spending or depending on foreign direct investment inflows, it said. An increase in the fiscal deficit would be minimal if tax rates were cut, it added.

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