Though Government borrowing will remain high, an easy money policy will help, to some extent, in improving the investment climate. Increased competition will keep prices of manufactured products down, the NCAER said in its latest quarterly update `Macro Track'. It also said that the rupee is expected to depreciate slowly over the year. Continued growth in software exports and remittances will contain the current account deficit within 2.2 per cent of the GDP. Budgetary incentives to the construction sector may push growth even further. A good harvest of foodgrains and commercial crops pushed agriculturalproduction to 5 per cent in 1998-99. This is expected to boost demand in the economy. Lowering of interest rates and credit reserve ratio (CRR) in the monetary policy is also expected to improve the investment climate.

With no attempt to pump prime in the budget, the demand crunch faced by industry would be relieved by the growth in rural incomes. Consequently, the ncaer said, industrial output is expected to improve in comparison to 1998-99. If the monsoon in 1999-2000 is normal and agriculture continues to do well, GDP growth would be pushed up to 5.7 per cent. This is higher than the 5.4 per cent growth the economy witnessed in 1998-99. In this scenario, industry would grow at 5 per cent, up from this year's growth of 4 per cent.

Growth is services is expected to remain buoyant. Growth rate in the service sector in real terms is expected to rise from 7.1 per cent in 1988-99 to 7.7 per cent in 1999-2000. Agricultural growth is expected to be 4.1 per cent. Over the high base of 1998-99 this would be afairly good performance.

The fiscal deficit in 1998-99 is projected to be 6.5 per cent of GDP. For fiscal 1999-2000, the NCAER calculated fiscal deficit as a per cent of GDP using both the new and the old definition for the sake of comparison with the 1998-99 figure. According to the old definition the deficit will be 5.9 per cent of GDP (1980-81 base). Thus a marginal improvement is expected owing to higher receipts on account of the addition to tax revenue as a result of the new proposals. However, if the definition used by the Government in the union budget 1999-2000 is used, it does not include small savings. The deficit is expressed as a per cent of GDP with 1993-94 base.

Now the fiscal deficit in 1999-2000 stands at 4.2 per cent of GDP (against the target of 4 per cent). What appears to be a sharp improvement from 6.5 to 4.2 per cent is thus due to the change in the definition and GDP base rather than fiscal prudence on the part of the Government.