NEW DELHI, India, Feb. 26, Reuter: India put a gloss on its drought stricken economy on Friday, forecasting it would grow by one to two percent in the current financial year, a finance Ministry survey said.

The economic survey said the growth in the fiscal year, ending March 31 was mainly due to industrial growth, which hit 10.2 percent between April and November from 8.5 to nine percent in the same periods between 1984 and 1986.

The survey was released ahead of next fiscal year’s budget, due to be presented to Parliament on Monday.

Industrial growth overcame setbacks caused by a drought which is expected to cause a seven to 10 percent decline in Agricultural production in the current year against the previous year, the survey said.

Last October the World Bank estimated India would have a zero growth rate in 1987/88 due to the drought caused by four weak summer monsoons in a row.

The survey said the drought did not affect the distribution of food grains although it damaged the summer crop. Food grain production declined from more than 150 million tons in 1985/86 to about 144 million tons in 1986/87.

The survey said the drought caused food shortages led to a rise in prices in fiscal 1987/88, particularly for agricultural commodities, including edible oils and oil seeds, spices, cotton and cereals, the survey noted.

The survey said the government held the inflation rate to 9.3 per cent in terms of the Consumer Price Index in December 1987, up just 0.1 per cent from December 1986.

The government also announced cutbacks in expenditure, of about 6.5 billion rupees (500 million dollars) in the current fiscal year.

“In view of the prompt, anticipatory measures, the financial consequences of the drought on the overall government budget deficit are likely to be contained within manageable limits”, the survey said.

The survey noted a strong export performance in the past two years, adding that exports grew by 24.6 per cent in first nine months of fiscal 1987-88 to 74.11 billion rupees (5.7 billion dollars) from 58.57 billion rupees (4.5 billion dollars) in the same period in 1986.

Imports rose 13.5 in April December 1987 to 103.98 billion rupees (7.9 billion dollars) compared to 92.39 billion rupees (7.1 billion dollars in the same period last year.

But it expressed concern over balance of payments, saying it was affected by a fall in growth of domestic oil output, protectionist bids abroad and bunching of repayment obligations to the international monetary fund and other creditors.

It said the rapid increase in government expenditure threatened to raise inflation.

The survey warned that the balance of payments were mainly dependent in the short term on the rapid growth of exports and by raising the quality and price competitiveness of locally manufactured goods and efficient import substitutions,

It also emphasized the importance of keeping commercial borrowings within prudent limits to finance the balance of payments.

Article extracted from this publication >> March 4, 1988