Asking the G-20 nations not to withdraw the economic stimulus packages as 90 million people are likely to turn poor in developing world, India on Friday said its economy would grow by 6.3 per cent this fiscal despite the drought and global financial crisis.
"...we have weathered the crisis relatively well given the circumstances...In 2009, despite a drought, which will affect agricultural production, we expect to grow by around 6.3 per cent in 2009-10 and then recover to 7 to 7.5 per cent growth next year," Prime Minister Manmohan Singh said at the Plenary Session of G-20 meeting in Pittsburgh.
He said this relatively strong performance is partly due to the strong stimulus measures introduced in the second half of 2008-09, which have been continued in this fiscal.
However, the global financial crisis has affected the developing world significantly, Singh said adding an estimated 90 million people in the developing world are likely to be pushed below the poverty line.
This may lead to social and political tensions undermining the national consensus in support of much needed structural reforms and adjustment.
He said the prospects of convergence among the nations was bright before the crisis but has now receded.
"We must take steps to counter these developments and restore the momentum of growth in the developing world," Singh said, adding the nations must take a commitment that they will not withdraw stimulus prematurely.
The Prime Minister said the global economy may be bottoming out, but it is not expected to reach three per cent growth until the end of 2010.
"We must certainly plan for an orderly exit when the time is right, but that time is not now," Singh said.
Countries around the world gave stimulus packages to pull their economies out of recession or slowdown. India gave a series of such packages by cutting excise duty by six per cent, service tax by 2 per cent, increasing plan expenditure, besides monetary stimulus.
After going by nine per cent per annum for four years, Indian economy slowed down to 6.7 per cent in 2008-09. In the first quarter of current fiscal, the economy grew by 6.1 per cent.
The Prime Minister said despite no role of their own in global financial meltdown, the developing countries are the hardest hit by the development.
"In the seven years before the crisis, the GDP of the developing countries grew at an average of 6.5 per cent per year. In 2009, it will grow by only 1.5 per cent, implying a fall in real per capita income," he said.
Lower revenues in developing countries will lead to cut in expenditure on rural infrastructure, health and education, Singh added.
"This will not only hurt future growth, but also delay achievement of the Millennium Development Goals," he said.