NCAER cuts India growth forecast to 5.9%

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SummaryThink tank NCAER today said growth will be lower due to slowdown in key sectors.

Think tank NCAER today said the country's growth rate is likely to be 5.9 per cent, a tad lower than its previous forecast due to slowdown in key manufacturing and services sectors.

"India's growth prospect for the current fiscal does not look encouraging as growth has been slowing down across all the broad sectors ... (our) assessment places the oveal GDP growth ... at 5.9 per cent in 2012-13," the institute said in its quarterly review of the economy.

The latest growth projection is 0.5 per cent lower than its forecast in July.

NCAER said that this decline in growth assessment has come across all sectors, especially industry and services.

The lowering of growth forecast comes on the back of a similar move by the Reserve Bank of India (RBI).

Last month, the RBI sharply lowered economic growth projection for the fiscal to 5.8 per cent from 6.5 per cent.

The latest forecasts of GDP growth by various agencies, including IMF and ADB, are in the range of 5.6-6.7 per cent.

On new reform measures announced by government, NCAER said although they may improve the economic outlook in second half of the year, "the significant slowdown of investment in the first half would keep the overall GDP growth lower".

The measures include, diesel price hike, capping supply of subsidised LPG cylinders and liberalisation in FDI policy.

On price rise, NCAER said the Wholesale Price Index (WPI) based inflation is expected to remain high in the fiscal at 7.4 per cent due to increase of domestic oil prices.

The growth rate of exports is estimated at 7 per cent, lower than July forecast of 17.2 per cent.

On Current Account Deficit (CAD), NCAER said is estimated to remain at 3 per cent of GDP.

Based on various variables like rainfall and bank credit, NCAER further said growth in the second quarter would be 5.3 per cent, down from the earlier projection of 6.6 per cent.

According to government data, the growth has averaged 5.4 per cent over the previous two quarters which is lower than 6.5 per cent in 2011-12 and 6.7 per cent in crisis-hit 2008-09.

It also said hike in diesel and LPG prices would have positive impact on overall fuel prices.

According to it, subsidies will remain at the level of budget estimates due to the hike in prices of diesel, petrol and LPG. NCAER expects government earning from disinvestment of its stake in public sector unit at Rs 15,000 crore.

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