India’s growth to fall further: Economist Group


New Delhi : The Economist Intelligence Unit (EIU) has predicted a 5.6 percent economic growth for India, much lower than the 7 percent expansion forecast by the government and policymakers.

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“We expect India’s GDP (gross domestic product) to grow by only 5.6 percent in 2008-09, compared to 9 percent last year,” said Manoj Vohra, director of research at EIU, a think tank of the Economist Group.

“India is not alone, China too appears to be heading for a sharp slowdown.”

The projection comes a day after the Reserve Bank of India (RBI) revised the overall real GDP growth for 2008-09 to 7 percent from the earlier 7.5-8 percent in its latest review of the monetary policy.

EIU also said India’s monetary policy would be eased further this year following two cuts of 25 basis points each in the repo rate in the first half of 2009.

It, however, added that the RBI might not be able to cut key interest rates more than this “as India will remain vulnerable to inflationary pressures arising from currency depreciation and wage growth”.

EIU research also suggested that global trade is set to contract 1.5 percent this year.

“Emerging markets like India have had a good run in recent years on the back of buoyant world trade growth and abundant global liquidity, which in turn drove strong domestic demand expansion. However, the environment changed dramatically in the second half of 2008 and will deteriorate further in 2009,” added Vohra.

But India continued to be an attractive investment destination compared to other economies, EIU said.

“The country’s relatively low dependence on exports limits its direct exposure to the global slowdown. As developed-world interest rates tend towards zero, emerging markets like India will remain attractive,” he said.