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• Slower growth forecast for India

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  Amarendra Dhiraj    Group moderator

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  Slower growth forecast for India

  India's economy is headed for slower growth after expanding at a brisk 9 percent rate the last two years, the Asian Development Bank said Tuesday.
  
  The bank projects 8 percent economic growth in India for the fiscal year through March 2008 largely because of the measures taken by the government and the central bank to curb inflation.
  
  For the current fiscal year, growth is expected to climb to 9.2 percent from 9 percent last year.
  
  India's sizzling growth has spurred worries that the economy lacks the infrastructure -- roads, ports and power generation -- to sustain such robust expansion, sparking inflation and hurting wage-earners.
  
  "We feel 8-8.5 percent growth is what India can sustain under present conditions," said Narhari Rao, an ADB economist based in New Delhi.
  
  Also, optimism over growth prospects has led to a surge in inflow of foreign capital and a consequent appreciation of the Indian rupee, which could dent competitiveness of Indian exports, ADB said in its annual report on Asian economies.
  
  The inflow of foreign money also complicates efforts by monetary authorities to rein in prices.
  
  The inflation rate reached a two-year high of 6.7 percent in early February, prompting the central bank to increase interest rates and announce a series of measures to squeeze excess money in circulation. The government also cut duties and banned futures trading in several agricultural commodities to boost supply.
  
  These measures will slow growth to 8 percent next year, ADB said. But other structural changes within the Indian economy will still help it grow at an impressive pace, the report said, pointing to the rapid expansion of manufacturing capacity.
  
  The measures taken by the government and the Reserve Bank of India will help lower inflation to 5 percent next year, the report said.
  
  "A soft landing therefore appears likely," it said.
  
  The report predicted India's economic growth to inch up to 8.3 percent in the year starting April 2008 and that further acceleration would depend on how fast the country builds new infrastructure.
  
  • 27 Mar 2007, 5:32 pm
  Amarendra Dhiraj wrote: > India's economy is headed for slower growth after expanding at a > brisk 9 percent rate the last two years, the Asian Development Bank > said Tuesday. > > The bank projects 8 percent economic growth in India for the fiscal > year through March 2008 largely because of the measures taken by the > government and the central bank to curb inflation. > > For the current fiscal year, growth is expected to climb to 9.2 > percent from 9 percent last year. > > India's sizzling growth has spurred worries that the economy lacks > the infrastructure -- roads, ports and power generation -- to sustain > such robust expansion, sparking inflation and hurting wage-earners. > > "We feel 8-8.5 percent growth is what India can sustain under present > conditions," said Narhari Rao, an ADB economist based in New Delhi. > > Also, optimism over growth prospects has led to a surge in inflow of > foreign capital and a consequent appreciation of the Indian rupee, > which could dent competitiveness of Indian exports, ADB said in its > annual report on Asian economies. > > The inflow of foreign money also complicates efforts by monetary > authorities to rein in prices. > > The inflation rate reached a two-year high of 6.7 percent in early > February, prompting the central bank to increase interest rates and > announce a series of measures to squeeze excess money in circulation. > The government also cut duties and banned futures trading in several > agricultural commodities to boost supply. > > These measures will slow growth to 8 percent next year, ADB said. But > other structural changes within the Indian economy will still help it > grow at an impressive pace, the report said, pointing to the rapid > expansion of manufacturing capacity. > > The measures taken by the government and the Reserve Bank of India > will help lower inflation to 5 percent next year, the report said. > > "A soft landing therefore appears likely," it said. > > The report predicted India's economic growth to inch up to 8.3 > percent in the year starting April 2008 and that further acceleration > would depend on how fast the country builds new infrastructure.