India's GDP growth seen at 7.7% in FY 07

India's GDP growth seen at 7.7% in FY 07

By agencies   |   Tuesday, 23 May 2006, 07:00 Hrs
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NEW DELHI: India's economic growth could slow down to 7.7 percent in the fiscal year to March 2007 from an estimated 8.1 percent expansion in the previous year because of high oil prices, a leading economic think tank said.

All the three sectors, agriculture, industry and services are expected to witness lower growth rates, the National Council for Applied Economic Research (NCAER) said in its monthly report.

It forecast factory output to rise by 8.3 percent in 2006-07, compared with 9 percent in the previous year.

The report said that "Domestic oil prices will be revised upward, and this along with hardening of interest rates, would result in marginal decline of GDP growth in 2006-07."

India, which imports about 70 percent of its oil, has not increased domestic fuel prices since September last year even though world oil prices have risen sharply to about $70 a barrel.

Farm output, which contributes a fifth of GDP, is seen growing at 2.1 percent this year against 2.3 percent in 2005-06, NCAER said, citing slightly below normal monsoon rains forecast by the weather department. The services sector, with 50 percent share of GDP, is expected to expand by 9.6 percent this year compared with 9.8 percent in the previous year.

The think tank expects inflation to be contained at 4.3 percent this year against 4.4 percent in 2005-06. It projected India's fiscal deficit to drop to 3.9 percent of GDP in 2006-07 from 4.1 percent last year.

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