Stanchart raises growth forecast to 8.3% for FY08

Stanchart raises growth forecast to 8.3% for FY08

Mumbai: Standard Chartered expects the Indian economy to grow 8.3% in the fiscal 2007-08, up from an earlier forecast of 8.1 percent, and saw domestic growth cushioning global shocks.

It also changed its forecasts for the central bank to tighten its three key rates in the fourth quarter ending in March 2008.

“We are pushing back our view of 50 basis points increase in cash reserve ratio (CRR) (to 7.5%) and 25 basis points hike in both repo (to 8%) and reverse repo rates (to 6.25%) to Q4 of FY07-08," a Stanchart research note said.

The bank said it had earlier expected the CRR increase in the July-Sept quarter and repo and reverse repo rate rises in the Oct-March second half of the fiscal year.

“While the economy’s momentum in the first quarter is compelling us to revise our GDP forecast to 8.3% from 8.1% year-on-year for FY07-08, a slowdown in growth might be building up," Stanchart said.

“We will be watching the data more closely to determine the extent of the slowdown," it added.

Stanchart said it expected the central bank to raise rates as growth was likely to be strong enough to attract capital inflows.

“India is less vulnerable to global shocks than other countries in Asia due to the predominant domestic centric growth and despite a slowdown, it will still be amongst the fastest growing economies within the region," the Stanchart note said. “Thus, the use of CRR is likely to manage these inflows," it added.