Economy to grow by 4.67 per cent: Central Bank

The central bank has projected an economic growth of 4.67 per cent for the current fiscal year, despite poor harvest due to the late monsoon and shortage of chemical fertilisers during the harvesting season, and also despite the lack of a budget that could have helped the economy.

"Apart from the agriculture sector, industrial and service sectors were also not able to perform better due to the prolonged political transition coupled with structural problems in the economy," the central bank said in its study report that was formulated after a survey of 42 districts of the country.

Despite a 32 per cent increment of finance in agriculture in the last fiscal year, major crops — paddy (-six per cent), maize (-five per cent), wheat (-0.2 per cent) — recorded drop in production, it said, adding that the overall performance of the agriculture sector — that contributes around 33 per cent to the gross domestic product (GDP) — will, however, be satisfactory.

Likewise, industries were not able to utilise half their production capacity in the last fiscal year. "The industries were able to utilise only 58 per cent of their capacity in the last fiscal year," the report said, "The production of cigarettes, soaps and biscuits have declined. Industrial lending has also increased by 16 per cent."

Increasing labour cost due to frequent strikes, and rising prices of raw materials, have been posing challenges for domestic products to compete in the international market and bridge the ballooning trade deficit apart from product and market diversification. The low confidence of the domestic private sector has also made it difficult to attract foreign direct investment in the country, according to the central bank. "Lack of infrastructure development has also hit the industrial sector hard."

The tourism sector has performed satisfactorily, whereas the real estate sector was still under pressure, though it has contributed more revenue to the government coffer as compared to a fiscal year ago, it said, adding that transportation, communication, education and service sectors have expanded in the last fiscal year.

The central bank has concluded that due to the contracting industrial sector coupled with the over exposure of banks and financial institutions in urban areas, and land and housing, financial resources could also not be mobilised efficiently, which will hurt the economy.