The National Council of Applied Economic Research has revised its forecast for the country's gross domestic product growth for 2006-07 to 8.44 per cent, from the 8.13 per cent that it had forecast in October last year.
The projected real GDP growth is still lower than the 9 per cent witnessed in the first two quarters of this fiscal, but if compared to the earlier forecast it is higher by 0.3 percentage points.
Significantly, the NCAER has projected a lower fiscal deficit of 3.63 per cent for the current fiscal, against its October projection of 3.71 per cent. It has also projected a decline in the current account deficit to 1.93 per cent, from the earlier forecast of 2.11 per cent for 2006-07.
The council has kept its inflation forecast unchanged at 4.98 per cent for the full year. It has also maintained its agricultural growth estimate at 2.65 per cent for 2006-07 due to erratic and uneven rainfall witnessed across all regions this monsoon.
In its quarterly review of the economy, the NCAER has said the revised GDP forecast is on account of higher growth in the industry and services sectors. It has projected higher growth in industry and services sectors by 0.53 per cent and 0.29 per cent, respectively, to 9.13 per cent and 10.24 per cent.
According to the review, the question now was whether the growth can be sustained in future. "The year has been marked by both high output growth and also a higher rate of inflation, giving rise to concerns that supply constraints may now be emerging in some sectors. The strength of traditional demand constraints resulting from conditions such as poor monsoon, which was once a speed-breaker in growth, appears to be diminishing, as external demand is proving to be a source of continued growth," it said.
While the manufacturing sector grew 11.6 per cent during April-November 2006, growth in cement and steel segments was sluggish.
In the services sector, telecom, transport and financial fields were likely to remain the sources of growth over the medium term, especially if they reached out to rural areas which are presently under-served, the review said.