India growth on track for boom levels
India's economic growth is poised to return to boom levels but the
government should move slowly in rolling back stimulus and cutting its
hefty deficit, an influential official panel said Friday.
The economy is expected to grow at 8.2 percent next year and at least
nine percent the year after - the rate at which it was expanding before
the global financial crisis - the Prime Minister's Economic Advisory
The forecast came in a report released a week ahead of the national
budget in which the government is expected to lay out a roadmap for
winding down the stimulus aimed at shielding India from the global slump
that began in 2008. Reducing India's fiscal deficit from a 16-year high
of 6.8 percent is important as the government cannot continue with "the
kind of large revenue and fiscal deficits recorded in the last two
years," the council said.
But "we need to strike a balance between the need for growth and
(fiscal) consolidation" and maintain "adequate stimulus", council head
C. Rangarajan, a former Reserve Bank of India governor, said.
His statement was welcomed by Indian business leaders who have said
that the government should go slow in rolling back stimulus measures,
arguing that economic recovery needs to be entrenched.
"With the global economy yet to recover, which poses significant
downside risks to growth, there's a need to continue with the stimulus
measures for some more time," said Confederation of India director
general Chandrajit Banerjee.
The government also says it needs annual growth of 9.0 to 10.0
percent to make a meaningful impact on India's widespread poverty, with
a fast-expanding economy required to generate jobs.
The council said most the forecast growth would be domestically
driven - from billions of dollars in spending on India's dilapidated
infrastructure and personal consumption reflecting rising incomes.
It said it expected global conditions "to be somewhat better" in
coming years, helping lift India's exports after they were sideswiped by
the downturn, but it cautioned the pace of recovery in advanced
economies would be "subdued".
The council stuck by an estimate that the economy would grow 7.2
percent in the current fiscal year to March 2010, up from 6.7 percent
last year, but said the actual figure could be higher due to strong
industrial output. Rangarajan said he expected the government could
reduce the fiscal deficit to 5.5-5.8 percent of gross domestic product
in the next fiscal year. "We want fiscal consolidation," he said. "But
we really need to ensure that the impact on growth is minimised."
New Delhi, AFP