The Hindu : Business : ADB pegs India’s growth at 8 p.c.

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ADB pegs India’s growth at 8 p.c.

Special Correspondent

Lower growth will moderate inflation rate to 4.4 p.c. this yearEconomy will bounce back with 8.5 p.c. growth in 2009-10

NEW DELHI: With the UPA Government determined to rein in inflation through various fiscal and monetary measures — even at the expense of growth, if need be — the Asian Development Bank (ADB) on Wednesday projected a slide in India’s economic growth to eight per cent during the current fiscal as compared to the anticipated 8.7 per cent for 2007-08.

In its ‘Asian Development Outlook, 2008’ released here, the Manila-based multilateral institution, however, noted that the country’s economy would bounce back with a growth of 8.5 per cent during 2009-10, mainly in the wake of “a pick-up in consumer spending and more accommodative monetary policy.”

“Following the slowdown that began in FY2007 [2007-08], economic growth will likely moderate further to 8.0 per cent in FY2008.

“Overall GDP growth in FY2009 is predicted to return to around 8.5 per cent, nudged along by a broad-based pickup in spending,” the outlook said.

The ADB viewed that despite the faltering growth, the country’s economy “has built up considerable momentum in recent years and this sense of dynamism should help pull up the pace again.”

The growth outcomes in the economy over the next two years, however, would depend partly on the “timing and scope for relaxing the present tight monetary policy. Exactly, when this will be feasible will be determined by success in containing inflation,” it said.

Interestingly, ADB’s projection on India’s growth, coming as it does after the surge in inflation to 6.68 per cent, is the lowest thus far.

For, while the CSO (Central Statistical Organisation) advance estimates had pegged a growth of 8.7 per cent in 2007-08 as compared to 9.6 per cent achieved in 2006-07 and 9.4 per cent in the previous year, the Prime Minister’s Economic Advisory Council (EAC) had forecast a growth of 8.5 per cent for the new fiscal beginning April 1, 2008.

As per ADB’s outlook for India, along with the lower GDP (gross domestic product) growth during 2008-09, the rate of inflation would also moderate slightly to 4.4 per cent as a result of the various price line containment measures by the Government and the Reserve Bank of India (RBI).

However, the very next year (2009-10), a pull-back in growth coupled with a softening in monetary policy would again help the inflation rate inch up to five per cent, according to ADB’s (Resident Mission) Principal Economist Narhari Rao who described the recent price spurt as India’s “biggest worry” at the moment.

Despite the inflationary concerns owing to the global rise in food prices, the ADB projected a positive outlook for Asia, as a whole.

“Despite growth moderating, we still feel that Asia, including India, does have favourable policy conditions. We feel that productivity growth linked to economic modernisation and structural transformation will continue, which basically means that these economies will continue to invest and continue to grow,” Principal Economist said.

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