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GDP to grow by up to 9.5 % : Moody's

NEW DELHI: Financial service firm Moody's on Friday said India's growth prospects over the next few years remain robust and the economy is expected to expand by 8.5-9.5 per cent annually despite the slowdown during the January-March quarter of last fiscal.

Terming inflation as the biggest challenge before the Indian economy, Moody's said the Reserve Bank of India should focus on controlling the price rise and added that maintaining the balance between growth and inflation would be a test for policymakers.

“The slowdown in India's real gross domestic product (GDP) in the three months to March was not entirely unexpected... The economy is still carrying strong growth momentum into 2011 and should grow in a range of 8.5-9.5 per cent over the next few years, in line with its recent trend,” it said in a report.

The country's economy grew by 7.8 per cent during the quarter ended March, the slowest pace of growth in the last five quarters mainly on account of poor performance of the manufacturing sector. It had registered a growth of 9.4 per cent in the corresponding quarter of the previous fiscal and by 8.3 per cent in the third quarter of 2010-11.

Overall, the economic growth during 2010-11 was 8.5 per cent, a tad below the government's forecast of 8.6 per cent, but well above 8 per cent registered in 2009-10.

Calling upon the RBI to be proactive in controlling inflation, which it termed as the biggest threat to India's growth, Moody's, however, cautioned that policymakers would face a tough task in balancing between growth and price rise.

“As for controlling inflation, the central bank's job is far from done...Interest rates will have to rise further to tame inflation and that will come at the expense of investment. Policymakers' greatest challenge will be managing the balancing act between inflation and growth,” Moody's said.

Headline inflation has been above 8 per cent since January 2010 and stood at 8.66 per cent in April this year.

Primary obstacle

Moody's said that global commodity prices, particularly of crude (which are currently above $100 a barrel) remain the primary obstacle in the path of economic growth.

Regarding exports, Moody's said overseas shipments remained robust despite the slight dip in April as against March. “Exports growth remained robust... demand from within Asia remains solid,” it said. — PTI

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