“While the GDP growth in the base case is projected to be 8.5 per cent, in the more comprehensive case, GDP growth is projected at 8.9 per cent,” the latest quarterly review of the economy by NCAER said.

Last week, RBI had projected a GDP growth of 8-8.5 per cent this fiscal, assuming that global financial and commodity markets and real economy will be broadly aligned with the central scenario and normal monsoon conditions prevail.

The short-term prospects are less attractive than a year earlier despite the fundamentals of growth remaining intact, NCAER said.

Inflation, during the year, is likely to be in between 4.9 and 5.2 per cent against 4.4 per cent last year. At the same time, fiscal deficit is projected to be close to 3 per cent of GDP even under the higher growth scenario, it said.

As per the advance estimates for 2007-08, the country’s economy expanded by 8.7 per cent. The report said the sustainability of the growth momentum is clearly subject to overcoming the shocks and constraints along the way.

Cyclical downturn

Pointing out the constraints, the report said the cyclical downturn in advanced economies and high commodity prices in international markets due to both short-term supply shortages as well as high growth in economic activity in the emerging economies could act as shocks.

The NCAER report also said the world GDP growth is now expected to decrease by more than one percentage point in the year 2008 over its level in the previous year. The fuel and non-fuel commodity price rise witnessed in the last year is expected to continue in the present year.