The Indian economy is expected to grow by close to 8 per cent in 2008, notwithstanding, the slowdown in the global economy, Deutsche Bank Chief Economist Norbert Walter has said.
"Lot of underline strengths are there which will keep growth prospects strong at a time when there is global economic downswing," he said at a lecture here.
Factors like rising in fixed capital investment, as percentage of GDP, favourable monsoon and low external debt would keep growth momentum strong, he said.
For the entire current fiscal, the Prime Minister's Economic Advisory Council GDP growth expectation is 7.5-8 per cent.
On global outlook, Walter said, higher commodity and food prices, high inflation rates and more restrictive monetary policy will dampen global growth.
US economy is well below its potential due to sub-prime crisis, he said.
Inflation rates are well above the target rate all over the world. This raises the probability of stagflation scenario, he added.
The phenomenon of high inflation rate coupled with stagnating economy is called stagflation.
Walter said, the drag, however, seems to be double digit inflation in India, which needs to be checked immediately.
For the week ended July 26, inflation breached 12 per cent mark in 13 years. The rate of price rise during the week was 12.01 per cent, against 11.98 per cent in the previous week.
Besides, farm loan waivers, wage hikes and other pre-election measures will continue to strain finances, he said.