Economy to grow at 8.5 pc in FY 07-08

New Delhi, Sep 5: UNCTAD's Trade and Development Report, 2007, released here today projects an 8.5 per cent GDP growth for the Indian economy for fiscal 2007-08, but warns that its high investment rate of 30 per cent of GDP can only be maintained if large external shocks are avoided.

It acknowledges that East and South Asia continue to experience particularly high growth, owing to strong performances of China and India. It also says that East, South and South East Asia have benefitted from the dynamism of India and China through strong export performances.

''The high investment ratios--exceeding 40 per cent of GDP in China and close to 30 per cent in India--can only persist if large external shocks can be avoided and if economic policy is not forced to limit expansion to a greater extent than currently envisaged.

This should not lead to an overshooting of exchange rates and to a major policy shift in the United States,'' the Report says.

Briefing newspersons on the flagship annual publication of UNCTAD, Dr Nagesh Kumar, Director General of Research and Information Systems for Developing Countries (RIS), said the chances that GDP growth for fiscal 2007 would be higher than that projected by UNCTAD. He said the last fiscal ended with a growth rate of 9.2 per cent, a figure higher than the one envisaged by the Indian government or other agencies.

Noting that GDP growth for April-June,2007, had been of the magnitude of 9.3 per cent, has lent support to the belief that GDP growth for the current fiscal would also be higher than the one projected by UNCTAD or other agencies.

Dr Kumar said the rider, however, was that the global economy should remain robust as had been the case for the last five consecutive years.

He said China and India were again setting the pace for growth in the developing world, as the Report succinctly brings out, and given their high investment rates, this is likely to continue in the years to come. The main risk, the Report warns, is that a major recession in the United States could sharply curtail these countries' exports.

The Report brings out that the world economy will maintain its momentum with an overall growth rate of 3.4 per cent in 2007. Africa is expected to continue economic growth of 6 per cent in 2007, while Latin America and West Asia will slow down only slightly to around 5 per cent.

UNI