NCAER has warned that India's exports might miss the target of 12 per cent growth this fiscal due to the appreciating rupee.

Though global economic recovery would help India's exports, its growth could at best be 10 per cent this year, the latest quarterly review of NCAER said, adding that the target growth of 12 per cent "seems unlikely".

It said the global outlook had improved significantly since the last quarter and the UN expected the world economy to grow at 3.5 per cent, up from 3 per cent forecast in June 2003.

The North America remained the driver of global economic recovery, NCAER said.

With the exception of the United States, India's exports to four other major trading partners had registered a positive growth.

"Exports to the US have declined by 4.8 per cent during April-August 2003-04," it said, reasoning that such a decline might be partly due to the outcome of rupee appreciation against the dollar.

The Delhi-based economic think-tank said the cutting of customs duties would increase the imports further.

It said imports had grown by 22 per cent in the first eight months of this fiscal with non-oil imports increasing by 28 per cent mainly due to imports of capital goods that grew 30.1 per cent during April-August.

NCAER said the imports of capital goods accelerated from 13.9 per cent in 2001-02 to 18 per cent in 2002-03.

NCAER said the increasing inflation was mainly due to rise in the prices of basic metals and alloys, basic organic chemicals, and fuel.

On the prices, NCAER said the average agriculture price was likely to rise by 5 per cent.

It said the rate of inflation for the manufactured items was currently highest in the last eight years.

It said the projection of over 8 per cent growth was based on bumper crop of 216 million tonnes, the 10 per cent increase in government investment, and two per cent increase in indirect tax rates.

The consumption of government would rise by 9 per cent in "nominal" terms and there were structural weaknesses in resource mobilisation and expenditure management.

"At present revenue expenditure accounts for nearly 83 per cent of the Centre's aggregate expenditure and only 17 per cent goes for the investment purposes," NCAER said, adding that the flurry of policy announcements early this month will have "far reaching" impact on the Indian economy.

NCAER said the fiscal deficit might not witness a substantial reduction this fiscal on account of enhanced non-plan capital expenditure and in view of recently announced tax cuts.