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Thursday August 14, 1:03 AM
India set for 7.7 pct growth, risks loom: govt panelIndia's economic growth will likely slow to 7.7 percent this year, hit by global financial turmoil, inflation and a dive in farm output, and could weaken further, a top government panel said Wednesday. The forecast by Prime Minister Manmohan Singh's Economic Advisory Council painted a grim picture of the challenges facing Asia's third-largest economy and was sharply down from the panel's earlier 8.5 percent growth projection.
"No country, except the large commodity exporting nations, can perhaps expect to emerge unscathed from such adverse worldwide conditions," the panel said in its Economic Outlook for the fiscal year to March 2009. "Inflation, growth and other macro-economic outcomes are all likely to be severely impacted," the 70-page report said. India's high-flying economy, which has drawn billions of dollars in foreign investment, has been losing steam not only due to global conditions but also because of aggressive monetary tightening to tame inflation. Inflation is now at a 13-year high of 12.01 percent, stoked by surging commodity prices, while interest rates are at seven-year peaks. The 7.7 percent growth projection was the lowest official forecast so far, although some private economists say expansion could be as slow as seven percent -- still strong by sluggish Western standards but not enough to lift tens of millions of India's poor out of deep poverty, economists say. The central bank, which has boosted interest rates to their highest level in seven years to curb consumer demand, last month cut its growth forecast to eight percent, the slowest since 2004, from a range of 8.0 to 8.5 percent. The economy grew by nine percent last year and 9.6 percent the previous year. "There's a slowdown in agriculture, industry and services and the global environment is not very conducive to growth. This will affect the Indian economy," said council panel head C. Rangarajan. The panel projected agricultural growth of just 2.0 percent, down from 4.5 percent last year and 10 percent five years ago, blaming a patchy monsoon. While agriculture accounts for just under 20 percent of GDP, the sector's health is vital to the economy as some 60 percent of India's 1.1 billion people rely on it for a living. The government was likely to hit its fiscal deficit target of 2.5 percent of GDP for this year but there were "serious fiscal risks" from growing off-budget liabilities stemming from its massive farm waiver scheme, consumer oil price subsidies and civil service pay hikes, the panel said. The economy also continued to be "acutely" restrained by frequent power outages, potholed roads, dilapidated ports and an antiquated rail system, it added. Growth could be even slower if global economic conditions deteriorate, "be it in the sphere of oil prices or capital markets," it said, warning of further potential setbacks in coming months. Asia's outlook could "have a major impact on India's economic outlook," the panel said. "The risk is that an abrupt slowing (in Asia) could occur sometime in late 2008 to early 2009," it said, noting labour indicators already show wages and hiring slowing across the region. The warnings marked a change to analysts' optimistic projections last year that India was far less exposed to global financial upheaval thanks to its still largely domestically-driven economy.
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