Higher public spending, greater capital inflows, stronger industrial production, and signs of improved business confidence will lift economic growth to 6 per cent in India this year, up from an earlier estimate of 5 per cent, said the Asian Development Bank (ADB) in a new report.
The Asian Development Outlook 2009 Update (ADO Update) said while agricultural output for 2009 is expected to remain stunted and exports weak, prudent economic management in the form of fiscal stimulus packages and accommodative monetary policy has minimised damage from the global financial crisis and is supporting a relatively strong economic expansion again.
The report has forecast growth of 7 per cent for 2010-11, also an upward revision from the 6.5 per cent projection in March. “The government’s strong fiscal stimulus, complementing the Reserve Bank of India’s aggressive monetary policy easing, has successfully brought last year’s economic slowdown to an end,” said ADB Chief Economist Jong-Wha Lee.
Growth in the April to June quarter reached 6.1 per cent, a pace faster than the previous two quarters where GDP grew by 5.8 per cent. The upturn reflects a recovery in industrial growth to 5 per cent from less than 2 per cent in the previous six months.
Weak agricultural output in the second and third quarters is likely to weigh on growth, although the report said a rebound is expected in the final quarter.