New Delhi: India’s economy is expected to grow by 9% in 2007 as against 9.2% in the previous year despite concerns of overheating, rising rupee and slowdown in US, according to a UN report.
Aiding India’s growth will be low oil prices, control on inflation and lesser reliance of its economy on exports, the UN Economic and Social Survey of Asia and the Pacific said.
Presenting the findings of the report, UN Under Secretary General Kim Hak-Su said services and industrial production would be the key growth drivers.
Despite the prospects of good growth, the Indian economy is overheating a little bit and the surplus in balance of payments was not there to provide cushion from external shocks, he said.
He said while oil prices were likely to be $60 a barrel as against $65 in 2006, inflation in India would come down to 5% this year from 6%.
Kim said while the US slowdown and uncertainty over sustainability of Japan’s revival would represent a downside for other economies of Asia-Pacific, India would be isolated as its economy was less dependent on exports.
Even the decline in value of dollar against the local currencies of Asia-Pacific would have an impact on them but India would be spared the shocks, the report said.
Agreeing with this view, Commerce and Industry Minister Kamal Nath, who was present at the launch of the report, said India’s growth was domestic market driven.
The report said for developing economies in the Asia-Pacific region, economic growth is projected at 7.4% in 2007.
“Momentum in the region is expected to come from China, India and Japan, which together contribute over 60% of the GDP of the Asia-Pacific region and close to 45% of the imports,” the UN report said.
It said managing exchange rates would be the biggest challenge in 2007.
“Nominal exchange rates in most of the region, especially in East and South-East Asia, appreciated significantly against the dollar in 2006, despite interventions to keep currencies down,” the report said, adding this appreciation is expected to continue in 2007.
The report has identified greater exchange rate flexibility as a “sustainable solution”.
While India’s services and industry have performed well in 2006, the report raises concerns over poor infrastructure development, especially in rural areas.
The report has also pointed out that with rural roads and electricity improvement having a significant impact on poverty reduction in India, China and Thailand, focus of these countries should be on rural development.
Growth forecast for Asia-Pacific economies in 2007 is “robust”, the report said, adding policymakers in the region need to focus more on medium-term policies for growth.