FT
India growth to near 2007 boom levels
By James Fontanella-Khan in Mumbai
Published: February 8 2010 09:40 | Last updated: February 8 2010 11:29
India’s economy is expected to grow 8 per cent in the year ending March 2011, close to levels hit during the 2007 boom years, according to Montek Singh Ahluwalia, deputy chairman of India’s planning commission.
Mr Ahluwalia’s comments came as the government said it expected India’s economy to accelerate at 7.2 per cent in the year ending in March 31, up 50 basis points from the previous fiscal year.
Indications that Asia’s third-largest economy was recovering quickly from the global economic slowdown strengthened expectations that the government may rein in its fiscal stimulus, analysts said.
“We should expect a partial roll back of the stimulus introduced by the government during the crisis at some point soon ... possibly during the budget,” said a senior economist who did not want to be named.
India’s budget is due later this month.
However, Anjan Roy, an economist at the Federation of Indian Chambers of Commerce and Industry, said it was too early to withdraw the stimulus as the economy was still at an early stage of recovery.
“The government should focus on controlling inflation, the stimulus should be left as it is helping the economy,” said Mr Roy.
Rising inflation has been the main concern for policymakers in India who fear it could hit the poorer segments of the country’s 1.2bn population. HSBC recently raised its forecast for India’s wholesale price inflation for this fiscal year from 8 per cent to 10 per cent.
Mr Ahluwalia said: “We will find an appropriate pace at which the stimulus is withdrawn and that’s what all countries around the world are doing, so we have to wait and see what happens.”
The Central Statistical Organisation said on Monday that the economy would accelerate this fiscal year on the back of strong growth in the manufacturing sector, forecast to rise at 8.9 per cent from 3.2 per cent, and the mining sector, which may grow at 8.7 per cent compared with 1.6 per cent.
However, the financial services and real estate sectors are expected to slow slightly to 9.9 per cent growth against 10.1 per cent in the previous fiscal year.
The latest government data is in line with most economists’ expectations and with the growth forecast of the Reserve Bank of India, the country’s central bank, which lifted its gross domestic product growth estimates to 7.5 per cent for this year.
Analysts remained bullish on India’s capacity to maintain growth despite fears that rising inflation could hit consumer spending.
“While the key driver of the growth acceleration recovery process in F2010 was greater traction to policy measures, in F2011, even as the policy makers gradually withdraw the monetary and fiscal policy support, we expect the recovery trend to be sustained,” said Chetan Ahya, an economist at Morgan Stanely. |
