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Growth estimates cut down

As the ripples of the global meltdown radiated beyond the financial markets into the real economy, India’s growth prospects have turned gloomier than expected earlier, reports Kamayani Singh.GDP growth in 2008-09

business Updated: Oct 17, 2008 01:19 IST
Kamayani Singh

As the ripples of the global meltdown radiated beyond the financial markets into the real economy, India’s growth prospects have turned gloomier than expected earlier.

Over the past two weeks, several research bodies and think tanks suggest the economy would likely grow about 7.5 per cent, if not less, through this fiscal year.

It would be a slide from 9 per cent, the average of the past three years.

Many believe the slowdown may not be a temporary blip. “We are reducing our GDP growth forecast for 2009-10 due to a weaker investment outlook,” said Tushar Poddar at Goldman Sachs. “The key risks in our view are oil, monsoons and politics.”

The International Monetary Fund, which recently revised its forecasts, said the Indian economy would grow just 6.9 per cent through the calendar year of 2009.

A prolonged slowdown puts at risk India’s hopes to make a significant assault on poverty and bring jobs to every member of the country’s labour force by 2010, besides propelling its economic stature closer to that of China.

“Since we need to add close to 10 million jobs every year, any slowdown in growth and employment is going to hurt,” said Amit Mitra, secretary general of Federation of Indian Chambers of Commerce and Industry. “A slower growth is certainly bad news for the common man."

The consequences are slowly becoming evident, the latest being the job cuts – the first ever, mass overnight layoffs -- at the country’s leading airlines.

Retail, transportation, exports, hospitality and real estate are the other sectors that would be hit hard. Aspirations of the young India were tied much to the boom in these businesses.

That said, even a 7 per cent growth would keep India among the world’s fastest growing economies.

Experts believe, the Indian economy can bounce back if the government and the central bank get their act right to keep the investment regime from slipping further.

“We need to make sure the huge investments that have been lined up for infrastructure projects do come through,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said in a recent interview.

With inflation easing, the RBI should cut interest rates and inject more liquidity than it has already done in recent days, said Chandrajit Banerjee, director general of Confederation of Indian Industry.