PTI
New Delhi: On the heels of Prime Minister’s panel lowering the economic growth projection for 2008-09, the research arm of London-based Economist has scaled down the expansion to 7.5% this fiscal from its earlier forecast of 7.7%.
“The moderation in growth would be on account of issues like tight monetary policy and some global factors, including rising prices of oil and commodities,” EIU (India) Director Research Manoj Vohra told PTI.
The PM’s Economic Advisory Council (EAC) recently revised its GDP forecast for the current fiscal to 7.7% from 8.5% projected earlier in the wake of slow down in industrial production and global financial turbulence.
India’s GDP, which grew by 9% in 2007-08, is expected to fall further in 2009-10 to 6.8%, Vohra said, adding “the long-term growth story remains intact and 2010-11 will see resurgence in growth”.
The RBI, too, in its first quarterly review of the monetary policy, had moderated India’s growth outlook to 8% from 8-8.5% projected earlier.
Delhi-based think tank NCAER expects the economy to grow by 7.8%, against the earlier projection of 8.8% in view of the slowdown in growth momentum because of factors like high inflation, rising interest cost and spiralling oil prices.
Justifying the moderation in economic growth, Vohra said that industrial production would be affected on account of measures taken by the banking regulator to squeeze money supply.
“Tight monetary policy will also hit corporate earnings and their expansion plans,” he added.
Further elaborating on the reasons of moderation in economic growth, Vohra said it would be primarily on account of domestic factors like rising interest rates though global factors will have some implications. Rising inflation, oil and commodity prices will also attribute to further moderation in growth.
As regards inflation, he said that it is likely to average 7.1% in 2008-09.
He said the effect of the banking regulator’s tight monetary measures is likely to show some result in the next fiscal.
However, the PM’s EAC had said inflation was mainly due to rising global commodity prices and could cool off to 8-9% by March 2009 by coordinated policy action while maintaining that tight monetary stance was necessary.