New Delhi: Multilateral lending agency Asian
Development Bank has revised upwards India's growth projection
to 6 per cent for the current fiscal on account of rising
business confidence but warned that inflationary pressure
would continue.
"Emerging signs of a recovery in private business
confidence and a continued large fiscal stimulus announced in
the July 2009 budget helped bolster India's projected economic
expansion to 6 per cent this year, upgraded from 5 per cent in
March," ADB said in its update on Asian Development Outlook
2009.
India, it added, would be able to clock 7 per cent growth
rate during 2010-11. Country's growth rate slipped from 9 per
cent to 6.7 per cent in 2008-09 on account of the impact of
the global financial crisis.
Projecting an inflation of 4-5 per cent by March 2010,
the ADB said, "inflationary pressures are likely to persist,
driven by high food prices and expansionary monetary and
fiscal policies."
The inflation has turned positive for the week ended
September 5, after remaining in the negative zone for about
three months.
Rising food inflation, ADB said, would create a dilemma
for the monetary authority which is currently engaged in
combating the impact of the financial meltdown by following
easy money policy.
On the positive, ADB added, delayed rains appear to be
filling water reservoirs to an adequate level to ensure a
reasonable winter crop harvest.
The multilateral lending agency further said that if the
large fiscal deficits are not reined in over the next few
years, the public expenditure-led growth strategy, although
appropriate given the global economic weakness, could prove
counter-productive.
"Apart from global uncertainty, the key downside risk to
the outlook emerges from financial crowding out of private
investment," ADB said.
The RBI has pegged the growth rate at 6 per cent for the
current fiscal, while the Planning Commission sees stronger
economic expansion in the second half which could push up the
growth rate for the current fiscal to beyond 6.3 per cent
projected earlier by the panel.
Growth in the first quarter of 2009 reached 6.1 per cent,
a modest rise on the previous two quarters, with the upturn
reflecting a recovery in industrial growth to 5 per cent from
less than 2 per cent in the previous six months.
"The government's strong fiscal stimulus, complementing
the Reserve Bank of India's aggressive monetary policy easing,
has successfully brought last year's economic slowdown to an
end," ADB Chief Economist Jong-Wha Lee said.
The agency has projected economic expansion in developing
Asia to come in at 3.9 per cent in 2009, up from the 3.4 per
cent expected in March.
Developing Asia to grow 3.9% in ‘09
Helped by robust growth in India
and China, developing Asia will grow by 3.9 per cent in 2009
to lead the recovery from global slowdown, according to ADB.
"Despite worsening conditions in the global economic
environment, developing Asia is poised to lead the recovery
from the worldwide slowdown," multilateral lending agency ADB
said in its update on Asian Development Outlook (ADO) 2009.
ADB has projected India economic expansion at six per
cent this year, upgraded from 5 per cent forecasted in March,
due to increase in public spending, a quicker than expected
return of capital inflows, stronger industrial production, and
signs of improved business confidence.
"Emerging signs of a recovery in private business
confidence and a continued large fiscal stimulus announced in
the July 2009 budget helped bolster India's projected economic
expansion to 6 per cent this year, upgraded from 5 per cent in
March," it said.
ADB further said that China's aggressive monetary easing
and the massive fiscal stimulus package rolled out by the
Government would bolstered the region's largest economy.
It projected China's growth at 8.2 per cent in 2009 and
8.9 per cent in 2010, up from the March forecast of 7 per cent
and 8 per cent respectively.
Bureau Report
First Published: Tuesday, September 22, 2009, 21:08