ADB Ups India's 2009 GDP Forecast To 6%

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The Asian Development Bank raised India's GDP forecast for 2009 to 6% from 5%, citing increased public spending, a quicker than expected return of capital inflows, stronger industrial production and signs of improved business confidence. In its Outlook 2009 Update, the bank also forecast India's GDP for 2010 at 7%, up from its earlier estimate of 6.5%.

The report said although agricultural output and exports have suffered, the country's adroit economic management by way of fiscal stimulus packages and accommodative monetary policy minimized the damage from the global financial crisis, and are now supporting a relatively strong economic expansion again.

ADB Chief Economist Jong-Wha Lee said that the government's strong fiscal stimulus, along with the Reserve Bank of India's aggressive monetary policy easing, has put an end to last year's economic slowdown. Growth for the first quarter was 6.1%, a rise compared to the previous two quarters, reflecting a recovery in industrial growth to 5% from less than 2% in the previous half-year. Companies reported higher net profits and external commercial borrowing rose 19% in June, the highest increase since September 2008. Although weak farm output in the second and third quarters might impact the growth, a rebound is expected in the final quarter, it added. The report said the growth for 2009 would continue on the back of government expenditure with countercyclical fiscal policies and renewed investor confidence likely to sustain an enhanced private consumption and investment.

''Another potential threat is that domestic food price inflation may create a dilemma for monetary management in 2009 as the Reserve Bank of India seeks to keep inflation expectations in check, but not to choke off a recovery,'' the report added.

(Market News Provided by RTTNews)