India’s Gross Development Product (GDP) will slow down to 8% in the next fiscal (2008-2009) from last year’s growth rate (8.7%) following to current moderation that came in the last quarter of the past fiscal. while in the year (2009-10) the GDP is expected to jump up again to 8.5% on the basis of boosting consumer spending and more accommodative monetary policy, said Asian Development Bank (ADB) in its latest released book ‘Asian Development Outlook,’ 2008 on Wednesday.
The Asian Development Outlook has also predicted about the inflation rate that is going to slightly moderate to 4.4% from last fiscal (4.5%) while in 2009-10 it is estimated to raise again to 5% in the response of growth rebounds and monetary policy.
The Manila based ADB (Asian Development Bank) has mentioned that United Progressive Alliance (UPA) are determined to curb the inflation rate and to hike the total growth rate of India. Still India could not sustain its current momentum because the inflation rate depends upon the two crucial factors, the level of domestic production and the course of international commodity prices, which puts dogmatic impact on any country’s Inflation and GDP.
“Despite growth moderating, we still feel that Asia, including India, does have favourable policy conditions,” said ADB’s (Resident Mission) Principal Economist Narhari Rao on the occasion of book-release. “We feel that productivity growth linked to economic modernisation and structural transformation will continue, which basically means that these economies will continue to invest and continue to grow,” he further said.
“The country needs to meet the macroeconomic challenges to ensure the current deceleration remains mild in the face of global market turmoil and economic slowdown,” said Ifzal Ali, Chief Economist of ADB.
On the other hand, in the private sector, the growth rate will continue to more than 6% in the current fiscal (2008-09) because of huge wage gains, income tax relief, debt waiver for the farmers, high prices for cash crops and pay hikes for civil servants in the presented budget for year 2008-09.
In the inflation term, the inflation rate of India is likely to nearby 4.5% in the fiscal 2008-09 because of critical price hike in food and fuel. The local supply of food grains and vegetables will also be affected because of insufficient sowing of the winter crop and that also looks possible in the summer crop in 2008.
In the last fiscal, the low-cost export business include textile and handicrafts were badly affected from rupee appreciation and government had to support the exporters by allocating them extra relief package. Similar, the higher value-added sectors like business services, Information Technologies, and capital-intensive manufacturing exports were also affected but could able to earn profit (however, the margin money declines as against 2006-07). The ADO assumes that rupee-dollar exchange rate is likely to stable in the next two fiscals.
The growth rate in the import sector will continue to higher viewing the broad market of consumption and large investment. The current account deficit is expected to 2.2 % in 2008-09 and 2.6% in 2009-10 while export rate will cross the 16% ceiling in 2008-09.
Asian Development Bank is situated at Manila, the capital of Philippines that was established in 1966 to eradicate poverty from Asia and Pacific region via pro-poor sustainable economic growth, social development, and good governance. At present there are 67 members of which 48 represent the regions. In the year 2007, ADB had approved a total of USD10.1 billion in terms of loans, USD 673-million as a grant for the projects, and USD 243-million as a technical assistance.
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