The world economy may be slowing down to less than 2.5 per cent, but in relative terms the “slowdown” in India would be something the world would envy. Overnight, India has become the second-most powerful engine of global growth, after China.
Even after moderating their GDP growth projections, estimates by economists show that the Indian economy could grow by between 6.3 per cent and 8 per cent, with World Bank and foreign investment banking firms being the pessimists and Indian research organisations and International Monetary Fund the optimists.
India’s economic growth may fall short of Reserve Bank of India’s 7.5-8 per cent forecast. “All indications are that it (GDP forecast) may be revised downwards,” RBI governor D. Subbarao said on Wednesday. He warned 2009-10 could be more painful.
With global trade expected to contract in 2009, the World Bank on Wednesday, in a report titled ‘Global Economic Prospects’, projected that the Indian economy would grow at 5.8 per cent in 2009, down from 6.3 per cent estimated for 2008.
It, however, raised the estimate for 2010 to 7.7 per cent.
“In India, growth slowed across all sectors, with tighter monetary policy, rising inflationary pressures, and mounting fiscal and current account deficits weighing down economic activity,” the report stated.
India’s data keeper, the Centre for Monitoring Indian Economy (CMIE), the most optimistic of the lot, expects the GDP growth to be about 8 per cent for FY 2009. “A combination of these factors (global slowdown, falling commodity prices and falling demand in textiles, automobiles and services) has led to this downward revision,” said Mahesh Vyas, CEO, CMIE.
Commenting on the World Bank projection, Suman K. Bery, director general, National Council of Applied Economic Research -- which has forecast a 7.6 per cent growth -- said, “It implies there’ll be a much steeper recession in the developed countries and global growth will be substantially because of India and China. I think we’ll be fortunate if we’re able to keep a growth rate of 7 per cent for FY 2010, which is unlikely.”
D.K. Joshi, principal economist, CRISIL, said, “We’ve reworked the growth rate to 6.5-7.0 per cent. The economy was already slowing down on account of high interest rates but the global meltdown that came sharply has made matters worse.”
But even these are subject to changing conditions. “Things are very volatile right now and we’ll have to see how they pan out,” said Abheek Barua, chief economist, HDFC Bank, which has forecast a 7.3 per cent growth.