Macroeconomic indicators - ADB raises GDP forecast for India
The Asian Development Bank has raised India’s growth forecast for the current fiscal to 8.5% from 8.2% but has expressed concern over the persistent high inflation and rising value of rupee which could undermine the future economic expansion.
ADB outlook Update said that “Growth is being supported by robust investment, increased capital inflows and stronger industrial output, buoyed by rising consumer demand.”
In April, the multilateral lending agency projected a growth rate of 8.2% for 2010-11. For the next financial year (2011-12), ADB has retained its earlier projection of 8.7%.
ADB’s growth projection for the current fiscal is the same as has been forecast by the Finance Ministry, the Reserve Bank of India and the Prime Minister’s Economic Advisory Council.
The multilateral lending agency, however, expects the average inflation to be 7.5% during the current fiscal as against its earlier projection of 5.5%. It added that “High food prices (will) remain a near-term concern.”
The rate of price rise, according to ADB, is likely to be at the same level during the next fiscal. The inflation, according to the new Wholesale Price Index with base year 2004-05 was 8.5% in August and food inflation was 15.10% for week ended September 4.
ADB also warned that the rising value of rupee does not augur well for the Indian economy in the coming years. Rupee appreciated more than 11% in real terms between August 2009 and August 2010.
High inflation and rupee’s sharp appreciation, it added, could erode India’s export competitiveness and its plans to further expand the economic growth to 9% to 10% in coming years.
Pointing out that RBI was projecting overall inflation to moderate to 6 per cent by March-end, the report said that “if price pressures do not abate as expected, the central bank will be hard pressed to intervene in the foreign exchange market to dampen rupee appreciation.”