The country’s economic growth would slow down to 7.1 per cent in the current fiscal year—the lowest in six years. India would still rate among the hottest growth economies in the world, alongside China.
Latest national income figures show India’s gross domestic product (GDP) growth rate would fall sharply by nearly two percentage points from the 9 per cent recorded last year. It is still higher than the US and European union nations that have clocked negative growth in the last few months. China grew by 9.1 per cent in 2008.
In India, the government exuded optimism amid expectations that more measures to spur growth could be announced during the interim budget next week, particularly for labour-intensive sectors.
In recent months the government has cuts excise duties and increased plan spending to help the economy tide over a ripple of recession in developed countries. But those sops could push up the fiscal deficit to a worrisome 7.9 to 8 percent of the GDP.
Finance ministry and Reserve Bank of India officials will meet next week to decide on the government’s borrowing requirements.
“Because of the stimulus the requirement has been more. Therefore, whatever is the requirement of the government, it will have to be met through borrowing,” Economic Affairs Secretary Ashok Chawla told reporters here.
“The RBI is poised to cut rates further. The government could focus pro-voter initiatives ahead of the polls,” said Rajeev Malik of Macquarie Securities.