Mumbai: The Indian economy would continue to clock more than 9% growth in the current fiscal, the Centre for Monitoring Indian Economy (CMIE) said in its monthly report on Monday.
“We had predicted a growth of 9.1% in our first forecast in February 2008, which was revised up to 9.5% in June 2008. We now believe that the economy would grow by 9.4% in FY09,” CMIE said. This marginal change is because of a downward revision in its industrial growth estimate, it added.
CMIE had predicted industrial growth at 11.4%. But because of a slowdown in the output of a few industries, “we now believe that the industrial sector would grow by 11.1%,” the report said.
Earlier, the Reserve Bank of India (RBI) and the Prime Minister’s Economic Advisory Council (EAC) had also indicated that the economy was headed for a slowdown. While RBI predicted the real gross domestic product (GDP) to grow by 8%, the EAC projected a 7.7% economic growth in FY09.
CMIE’s relatively upbeat forecast reflects two departures from observations made by other forecasters.
First, it considers the Index of Industrial Production (IIP) to be faulty and does not regard its sharp slowdown in the first quarter of FY09 to be a reflection of the reality.
Second, CMIE does not think that inflation is extraordinarily high so as to hurt growth. It believes that the Wholesale Price Index (WPI) is an inappropriate measure of inflation and the Consumer Price Index (CPI), a more appropriate measure, has seen a less vicious rise.
“We believe that inflation itself is unlikely to hurt growth, but, if RBI persists with its policy to contain liquidity any further, it may hurt growth,” the CMIE report said.
Despite RBI’s policy stance, credit growth has been robust so far and business, as seen in the growth of corporate sector’s sales, has been brisk.
Indian companies continue to aggressively invest into new capacities, affirming their faith in the economy notwithstanding the gloomy forecasts and the faulty IIP statistics, the report added.