The report "Economic Outlook for India: 1999-2000" prepared by IEG's development planning centre, however, has given various alternatives to attain a higher growth path. It has suggested the policy makers to either accelerate ongoing reform process to improve the productivity of domestic capital and labour or step up public investment by cutting government consumption and subsidies along with real depreciation of exchange rate. The first alternative to improve the growth rate, envisaged by the report, asks for gradual reduction in Bank Rate and CRR to attain the levels of 5 per cent and 7 per cent respectively in 2001-2002.

The second alternative suggests depreciation in the real exchange rate by 3 per cent, beginning 1999-2000, through appropriate forex management by RBI. And finally thirdone asks for enhancement in public expenditure exogenously, beginning 1999-2000, by Rs 10,000 crore.

The third alternative may be tried with two angles, the report says.

"In the first case, we assume that half of the increase in public investment is financed by RBI net credit to government, and in the second case we assume that half of it would be financed by additional taxation, with an appropriate mix of direct and indirect taxes," say forecasting experts in the report.

They have indicated that a liberal monetary policy might raise the average GDP growth rate by about 0.4 per cent over the next three years at the cost of about one per cent higher inflation rate over the base-line projection. Alternatively, "If the real exchange rate is depreciated, then the GDP growth rate may accelerate much faster to 6.5 per cent over the entire Ninth plan period." The inflation rate, however, will go beyond 10 per cent on an average and 14.4 per cent in 2001-2002.

Higher public investment can also achieve theplan target of 6.5 per cent GDP growth rate, according to the report. "If the investment is financed by extra printing of money, then the inflation rate will rise to an average of about 10 per cent over the next three years, which could be sustained at a social cost."

The current account deficit in this case, however, will shoot up to above 3 per cent of GDP and will reach 4 per cent by 2001-2002, which is obviously sustainable, the report says. Additional taxation can bring down both inflation and current account deficit, but only marginally.

Analysing these alternatives, the report has suggested that a demand stimuli from either exports or public investment can accelerate the growth rate significantly, but at the cost of higher inflation. Under the existing condition, the report has predicted a moderately higher level of economic activity in the remaining three years of the Ninth Plan, with an average GDP growth of about 6.1 per cent. Nevertheless, it says that downturn in the Indian economy is over andthe upward mobility regained in 1998-99 is maintained in 1999-2000.