India economy to grow by 8.2% in FY09;8.5-9% FY10:RIS

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New Delhi, Sep 4 (UNI) An RIS Study projects Indian economy to grow by 8.2 per cent this fiscal, but acclerate to 8.5 per cent or even 9 per cent level in 2009-10.

The factors that will impinge adversely on growth in 2008-09 primarily are the global slowdown and rising oil prices.

But the world of economics is not one of certainties. Global crude prices after touching a high of 147 dollars a barrel in mid-July have started softening. They are now hovering around at more than 105 dollars a barrel, resuscitating hope of an early revival of economies around the world, including India.

The RIS estimate is a little above the projection made by the Prime Minister's Economic Advisory Council of 7.7 per cent for 2008-09.

Finance Minister P Chidambaram is hopeful that the economy will be able to clock a growth rate of eight per cent in 2008-09, but the RIS projection will be music to the ears of the government.

The Study says Indian economy moved to a new higher growth trajectory since 2003 with an average growth rate of 8.7 per cent during 2003-08.

In 2007-08 the growth rate declerated to nine per cent from a high rate of 9.6 per cent in 2006-07. Among the factors responsible were a sharp appreciation of the rupee by 12 per cent which eroded the competiveness of exports and the credit squeeze unleashed by the RBI.

However, the trend of appreciation stopped in 2008-09 and in fact, the rupee has depreciated to some extent since then.

After many years of price stablity, the Report says controlling inflation has become a challenge for the policy makers.

The rupee appreciation was a result of massive capital inflows from Foreign Institutional Investors coming into the country to make money on the booming stock markets, the study says.

The study on the growth prospects of the Indian economy is part of the 'South Asia Development and Cooperation Report' brought out by the Research and Information System for Developing Countries (RIS).

However, the prospects of good monsson are likely ease inflation in future.

The Report says India's ability to sustain high growth rates in the medium term is a widely shared view. This is on account of the booming domestic base of entrepreneurship, rising savings rates, demographic dividend and emerging compartive advantage in knowledge-based sectors.

The Report says though the services sector has emerged as a key growth driver, industry has gradually recovered from the recession of 1997-2003.

The downside risks to the economy are posed by the ability of the government to meet the physical and social infrastructure needs and the rising oil prices. The investment requirements for infrastructure have been estimated at 500 billion dollars over the the five year period.

The Report says since South Asian nations, including India, are highly dependent on imported crude, any sharp rise in prices affects the growth prospects of these economies.

For instance, it has been estimated that a dollar per barrel variation in the international prices of crude results in a 500 million dollar change in India's oil import bill on an annualised basis at the current level of imports.

In simple terms, a 10 dollars a barrel increase could imply a five billion dollar addition to the import bill which is nearly half a per cent of the country's GDP.

RIS is an autonomus think tank funded by the Ministry of External Affairs. The Report on 'South Asian Development and Cooperation' is considered a landmark study of the issues involved.

''In the near term, controlling inflation without significantly affecting the growth momentum is a key challenge before the policy makers,'' the Report adds.

UNI MP-GS SG SSC1332

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