ICRA projects over 5% GDP growth in 2002-03

By SiliconIndia   |   Tuesday, 18 March 2003, 08:00 Hrs
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NEW DELHI: Brushing aside official estimates of 4.4 per cent GDP growth during 2002-03, ICRA on Monday said all indications pointed to an over five per cent growth this year.

"We find ourselves in unhappy and completely unwarranted situation where the official statistics will show a 4.4 per cent rate of growth, when all indications are that GDP growth in 2002-03, in reality, was well over five per cent," it said in its latest 'Money and Finance' bulletin.

The credit rating agency said the entirety of reduction in assessed growth in the advanced estimates was due to the negative GDP growth in agriculture and allied activities.

"The reasons for the Agriculture Ministry for making the assessment that it did, stem from the perverse incentive facing state governments, who in their desire to qualify for central drought assistance prevailed on their own agricultural departments to over-state the impact of drought," it said.

"Once the state governments put in their estimates, they could not go back on them, the Agriculture Ministry could not go back on the conclusions they had reached based on these inputs nor were they inclined to for that matter," it added.

ICRA said the Central Statistical Organisation (CSO) was bound to use the Index of Agriculture Production prepared by the Agriculture Ministry for the advance estimates.

The CSO's Advance Estimates of GDP for 2002-03 indicated that the Indian economy grew in real terms at constant prices by 4.4 per cent and by 6.8 per cent in nominal terms.

Asking whether agricultural GDP was "compressed", it said there was no evidence in the movement of farm product prices to suggest a large decline in output.

Highlighting the relative prices movements, ICRA said it indicated "substantial" output decline in bajra and groundnut, "but not in the other crops, which have probably experienced some decline, but nowhere of the order assessed by Agriculture Ministry."

"A significant drop in output cannot be but accompanied by a rise in prices," the credit rating agency said citing the official arguments that given the large official stocks of wheat and rice, the market prices of these commodities may not rise much.

It said pulses, cereals and oilseeds would reflect output impact on prices.

ICRA said it found evidences of "significant" increases in prices in the case of jowar, bajra and groundnut, where there was "sizeable" increase of nine-11 per cent in 2002, compared to declines or small increases in 2001.

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