Investment Levels Surge in India

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Oct. 14 – A recent survey of 21 leading economists predicted that India’s economy would grow at roughly 8.4 percent in the year ending March 2011, unchanged from a similar poll conducted in July and an improvement over the 7.4 percent growth experienced over the 2009/2010 fiscal year.

According to the Reuters quarterly survey, the economists also forecast growth of 8.3 percent for the 2011/2012 fiscal, a slight change from the 8.5 percent forecast in July.

India and other high-growth nations have been enjoying a swell of investment in recent months, buoyed by cheaply-borrowed money in developed nations and comparatively high-interest rates in developing ones.

“The rest of the world is starved for growth,” Manish Saini, an analyst and trader at Eastern Advisors, told The New York Times. “And India is still producing relatively high real rates of GDP growth.”

Hedge-funds and banks have been investing more money into developing countries such as India. In September alone, foreign investors poured US$7.1 billion into Indian stocks and bonds. India’s Sensex index is up about 22 percent in the last 12 months and 114 percent since the end of 2008. Moreover, the Indian rupee has appreciated about 4 percent against the dollar so far this year.

This growth though, may come to a halt as the nation continues to be affected by high levels of inflation. The same 21 economists forecasting strong economic growth also believe that India’s wholesale price inflation is set to expand by 8.3 percent at the end of the 2010/2011 fiscal year before slowing to 5.7 percent during the 2011/2012 time-frame.

“Rising cost pressures and global uncertainties are likely to have a sobering impact on India’s growth momentum,” warned Rupa Rege Nitsure, chief economist at Bank of Baroda, in a report by The Economic Times.