India Think Tank Forecasts 6.5 Percent Growth

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Oct. 23 – The Prime Minister’s Economic Advisory Council has made an official forecast that pegs India’s growth for 2009-10 at 6.5 percent backed by the strength of its industrial sector.

The think tank, led by former Reserve Bank of India governor C Rangarajan, said the government needs be careful of inflation and fiscal deficit. “(It is) unlikely that growth will be lower than 6.25 percent, but may reach 6.75 percent,” the panel said on its Economic Outlook for 2009-10 report.

The panel’s forecast is more optimistic compared to the Reserve Bank of India that pegged growth to expand by 6 percent in a July forecast. In September, the Planning Commission forecast GDP growth at 6.3 percent.

“In light of the recent resurgence in the non-farm sector the 6.5 percent growth rate is quite feasible. The manufacturing sector is bouncing back as is evident from the IIP figures and due to its strong correlation with the services sector, we can expect the services sector to turn around as well,” YES Bank chief economist Shubhada Rao told The Economic Times.

Despite signs that hint at India’s steadily recovering economy, analysts predict that India will still continue to rely on its stimulus measures to solidify growth and cushion it from the effects of a lowered agricultural output brought about by the poor monsoon.