2014-2015 Growth Forecast for Nation Lowered to 5%

NCAER Projects Slower Growth: 2014-2015 Growth Forecast for Nation Lowered to 5%

The fundamental aspects of the economy remained weak and there were uncertainties that emerged. It explained that “The only redeeming feature is the weakening of inflation and FDI inflows”. The growth forecast projection of lower than 5% was made in the mid-year review of the nation’s economy by the NCAER or the National Council of Applied Economic Research.

In the month of July, the think tank had predicted a growth forecast for India at 5.7% this year. The projection of the slowdown was despite a 5.7% growth in the first quarter of the current year namely April to September. This was following two years of below 5% growth, according to media reports.

The NCAER also projects slower growth during the remaining part of the year in conjunction with the forecast by RBI. “The NCAER is predicting a slower growth for the economy unlike other forecasts. The fundamentals of the economy remain weak with uncertainties prevailing,” NCAER said during its mid-year review.

Weakening of inflation and record FDI investment inflows are the bright achievements of the economy with a new government at the helm. But whether this helps to rev the growth engine will remain a question in face of agricultural damage due to a rainfall deficit. NCAER has also reported that following a good performance in May and June, there was a slowdown of the export growth in coming months. The growth rate in September was 2.73% and there is considerable scope for growth here.

The 2014-2015 growth for the farm sector remains pegged at a low percentage due to uneven distribution and a 17% deficit in rainfall which has pulled down the mid-year GDP projection. This sector grew by 4.7% last year and this year’s projection is even lower. NCAER also indicated that the manufacturing sector has proved to be a major loss making sector and that it “proved the biggest disappointment.”

Growth in the manufacturing sector contracted by (-)1 percent in July and (-)1.4% in August. Industrial growth has been pegged at 2.3% and official figures indicate last year’s growth was 0.4%. Services did not manage to reach the magic figure 7 this year. The Centre’s fiscal deficit has been projected by the NCAER as 4.3 percent of the GDP as against budget target of 4.1%.

"NCAER is predicting a slower growth for the economy unlike other forecasts. The fundamentals of the economy remain weak with uncertainties prevail. The only redeeming feature is the weakening of inflation and FDI inflows.Whether that will help us revive our growth prospects will depend on a number of factors including revival of the external economy and the extent of damage on agriculture due to deficit rainfall," NCAER indicated in a release.

"The economy is giving mixed signals. On one hand, we had the Sensex reaching record levels partly driven by record foreign institutional investment and FDI,” it also added. A positive development has been a rise in the business confidence index with the advent of a stable political regime and a new government, media reports indicate. However, NCAER has adopted a wait and watch policy.

"The pace of growth shows signs of slowing down in the services sector. Not surprisingly, bank credit to the commercial sector has not picked pace and continues to languish. Further, the slowdown in the external economy, except the United States, shows little growth prospects for the external sector even though exports grew in the first quarter," it said, according to an official release.