The Indian economy will experience a marked slowdown in the current and next financial years, ending its run of five consecutive years of very high growth, the Asian Development Bank (ADB) said in a new report.
The Asian Development Outlook 2008 Update forecasts India’s growth rate to decrease to 7.4 per cent in the current financial year (2008-09) and decelerate further to 7 per cent in the next year.
The new figures are down from ADB's earlier forecasts of 8 per cent and 8.5 per cent respectively, and much less than the impressive 9 per cent growth posted in the last fiscal year ending March 2008.
The report notes that current developments are challenging India's strong growth performance of recent years.
“The Indian economy is now at a critical juncture where policies to contain inflation and ensure macroeconomic stabilisation have taken centre stage,” said Ifzal Ali, chief economist of the Manila-based multilateral development bank.
Emerging capacity constraints, continued rapid expansion in credit, and an increase in global commodity prices have combined to trigger a spike in domestic inflation, the report said.