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India`s economy to expand 6% in `02: ADB
The country`s economy will expand faster this year and next, but high growth rates may not be sustainable, the Asian Development Bank said on Tuesday in Mumbai.
The country's economy will expand faster this year and next, but high growth rates may not be sustainable, the Asian Development Bank said on Tuesday in Mumbai.
The Indian economy is likely to expand by 6 per cent in 2002, up from five per cent last year, and by 6.5-7.0 per cent next year, the bank said in its annual outlook.
India will benefit from a rebound in the US, one of its two main export markets along with the European Union.
Exports, which fell sharply in 2001 after growing by nearly 20 per cent the previous year, are expected to record double digit growth this year, the bank said. The inflation rate is expected to be around 4 per cent this year and is likely to remain moderate even if there is a pickup in demand due to low capacity utilisation in the industrial sector, the report said.
But, over the medium term, high growth rates are not sustainable unless India tackles its high fiscal deficits and real interest rates, the ADB said.
Despite a decade of economic reforms, India has consistently overshot its fiscal deficit targets. The combined fiscal deficit of its federal and state governments, along with the losses of its public sector units, is estimated to be close to 10 per cent of GDP for the current fiscal year (April-March).
India follows an April-March accounting year while the ADB numbers are for the calendar year.
Despite deteriorating external demand, Indian economic growth in 2001 rose to five per cent from four per cent a year earlier, thanks to a sharp improvement in farm sector output following a good monsoon, it said. The farm sector is estimated to have grown 5.7 per cent in 2001 after contracting 0.2 per cent the previous year.
But sustainable growth in the sector over the medium term would depend on investments to ease infrastructure bottlenecks, particularly irrigation and rural electrification, and efforts to modernise the sector, the ADB said.
Agriculture comprises around a quarter of India's GDP but influences the livelihoods of two thirds of its population of more than a billion people.
The report said the services sector, which accounts for about half of GDP, would continue to fuel the economy. The sector expended by 6.5 per cent in 2001 compared to 4.8 per cent a year earlier. Bureau Report
India will benefit from a rebound in the US, one of its two main export markets along with the European Union.
Exports, which fell sharply in 2001 after growing by nearly 20 per cent the previous year, are expected to record double digit growth this year, the bank said. The inflation rate is expected to be around 4 per cent this year and is likely to remain moderate even if there is a pickup in demand due to low capacity utilisation in the industrial sector, the report said.
But, over the medium term, high growth rates are not sustainable unless India tackles its high fiscal deficits and real interest rates, the ADB said.
Despite a decade of economic reforms, India has consistently overshot its fiscal deficit targets. The combined fiscal deficit of its federal and state governments, along with the losses of its public sector units, is estimated to be close to 10 per cent of GDP for the current fiscal year (April-March).
India follows an April-March accounting year while the ADB numbers are for the calendar year.
Despite deteriorating external demand, Indian economic growth in 2001 rose to five per cent from four per cent a year earlier, thanks to a sharp improvement in farm sector output following a good monsoon, it said. The farm sector is estimated to have grown 5.7 per cent in 2001 after contracting 0.2 per cent the previous year.
But sustainable growth in the sector over the medium term would depend on investments to ease infrastructure bottlenecks, particularly irrigation and rural electrification, and efforts to modernise the sector, the ADB said.
Agriculture comprises around a quarter of India's GDP but influences the livelihoods of two thirds of its population of more than a billion people.
The report said the services sector, which accounts for about half of GDP, would continue to fuel the economy. The sector expended by 6.5 per cent in 2001 compared to 4.8 per cent a year earlier. Bureau Report