India’s economy could expand at a faster clip than previously expected in the year from 1 April, but growth is unlikely to be as high as in the current fiscal year, a Reuters poll of 11 analysts show.
Forecasts for growth in 2007-08 were lifted to 8% from 7.6% in a similar poll last November.
That is still slower than the 8.8% growth forecast for the year ending 31 March as analysts expect a series of monetary tightening measures to start trimming economic momentum.
“Coming on top of such strong growth in the past few years, it should slow next year,” said Indranil Pan, chief economist at Kotak Mahindra Bank. India has grown at an average of more than 8% in the past three years. Capacity utilizations are getting constrained, the central bank is turning off the liquidity flows and the global growth cycle may slow, which may hurt exports,” Pan said.
Industry grew by an annual 10.6% in the first nine months of 2006-07, the fastest since 1995-96. For eight of the nine months, annual growth in manufacturing was in double digits. Helped by strong expansion in services, which account for about 55% of GDP, the government has forecast economic growth of 9.2% in 2006-07, the fastest in 18 years.
This rapid growth has placed more money in the hands of a 300-million-strong middle class, spurring demand for real estate and consumer goods.
It also created bottlenecks in infrastructure and supply, fanning inflation and raising concerns that the economy may be overheating. Rising prices have forced the central bank and the government to take a variety of measures to combat inflation, including quantitative tightening, interest-rate increases and cuts in import duties, moves that analysts say may affect growth.