New Delhi: The worst is yet to come for India as leading economists and think tanks projected a further decline in the growth rate in 2009-10 mainly on account of the global financial meltdown on the country.
The growth rate, expected to slip below 7% in the current fiscal from a high of 9% in 2007-08, will decline further.
“We think the growth rate for the current fiscal would be about 6.3% and next year it should be between 5% and 5.5%,” ICRIER director Rajiv Kumar said.
Expressing a similar view, Yes Bank chief economist Shubhada Rao said the Indian economy is expected to grow at 6.7% for the current year and it could fall to 6.2% in the next fiscal.
Global financial services firm Citi has also projected the growth rate slowing down to 6.8% for 2008-09 and 5.5% for the next fiscal.
The Indian economy grew at 7.8% in the first half of the current fiscal compared with 9.3% in the same period in the last fiscal.
The country’s exports, which posted a robust 30.9% growth rate in the first half of this fiscal, contracted by 12.1% in October -- the first time in five years. The negative trend continued in November, when exports fell to $11.5 billion from $12.7 billion in the year-ago period.
In order to reverse the economic slowdown, the government has announced two stimulus packages, seeking to raise public spending and making available easier credit for sectors such as exports, housing and small industries.
Simultaneously, the RBI also cut key policy rates and ratios to infuse liquidity into the banking system, in addition to signalling a soft interest rate regime.
In December last year, the government slashed excise duty by 4% across the board and announced raising public expenditure by Rs20,000 crore in the current fiscal.
The government also announced a fresh stimulus package at the beginning of 2009 to reverse the economic slowdown, taking its total revenue loss to Rs40,000 crore, through higher public spending and easier credit especially for exports, housing and small industries.
Since October 2008, the RBI has released over Rs3,20,000 crore into the banking system to usher in a low interest regime in the economy, as prices of fuel, metals and agri commodities plunged, easing inflationary pressure.
In spite of these measures, the former chairman of the PM’s economic advisory council, C. Rangarajan, expects the economy to grow at a moderate level of around 7% in the current fiscal and the next. He sees bounceback only in 2010-11.
“The growth rate for 2008-09 would be about 7% and for the next fiscal also it will be around 7%. In 2010-11, it will pick up, depending on the global scenario,” he said.
However, according to economic think-tank RIS director-general Nagesh Kumar, there could be a marginal pickup in economic growth next fiscal due to fiscal measures taken by the government and prices of crude being low.
“I think the worst is over. I expect economic growth of 7% in the current fiscal. It might rise marginally to 7.2% in the next fiscal,” he said.