New Delhi, March 9: Industry believes that GDP growth for 2002-03 will remain above 5 per cent. Almost 79 per cent of the respondents to a CII snap poll of CEOs did not subscribe to a 4.4 per cent growth forecast this fiscal (2002-03) by the Central Statistical Organisation (CSO).
Out of the respondents that disagreed with the CSO number, 33 per cent said that GDP growth in 2002-03 would be between 4.4-5 per cent and the remaining 67 per cent felt that GDP growth would continue to be above 5 per cent. This is also in line with CII’s forecast for 2002-03.
According to CII, the industrial and services sector alone would lead to a growth of 5.4 per cent in 2002-03. In addition, the chamber does not expect the growth in agriculture to fall below negative 2 per cent.
On the growth prospects for the upcoming fiscal, 34 per cent respondents were of the opinion that growth would be between 5-5.5 per cent and another 34 per cent said that it would be between 5.5 and 6 per cent. The remaining 32 per cent felt that GDP growth would exceed 6 per cent.
The CEOs said the Fiscal Responsibility Bill is required to be passed in the current budget session with a restoration of the fixed caps on government spending and the limits on fiscal and revenue deficits. Last month, the Cabinet decided to move amendments to the Bill that would remove the numerical limits that had been set in the legislation. It is now awaiting parliamentary clearance.
“The CEO snap poll has revealed that 75 per cent of the respondents were of the opinion that the Fiscal Responsibility Bill needed to be passed with the restoration of the fixed caps. This would be a significant step towards the practice of greater fiscal prudence by the government,” said a CII release.
Although the Bill is expected to be discussed in the budget session of Parliament, the Bill in its current form — without fixed caps on fiscal deficit, revenue deficit and public debt — will be rendered useless, says CII.
When the Bill was initially introduced in 2001, it targeted a reduction in the fiscal deficit to 2 per cent of GDP within five years of its introduction. This provision is now being removed.
The revised Bill essentially absolves the government from meeting any quantitative targets for deficit reduction. It only requires the government to present the budget every year in the context of a long-term fiscal framework.
CII says that one of the greatest concerns emerging out of the budget 2002-03 is the burgeoning fiscal deficit. The combined fiscal deficit of central and state governments at over 10 per cent of the GDP is not sustainable in the medium term.
However, industry believes that though the fiscal deficit is high, the good performance of the Indian economy will help the government adopt measures for fiscal consolidation and fiscal prudence.
Regarding rating growth facilitation provided in the budget 2003-04, 60 per cent of the CEOs said it was good, 32 per cent felt it was outstanding and the remaining 8 per cent felt that the budget provided poor impetus.