India is set to surpass China as the fastest-growing economy in Asia next year on the back of increasing consumer demand and public investment in infrastructure, global research firm Credit Suisse has said.
In its December forecast, the firm upgraded India's economic growth rate to 9.5 per cent in 2006 from 8.5 per cent projected in September this year.
The economy would grow by 10 per cent in 2007 and 10.5 per cent rate in 2008, it added.
"Our most significant growth upgrade for 2007 is in India from 8.5 per cent to 10 per cent, surpassing China to become the top growth performer in the region," Credit Suisse research analyst Dong Tao said in the report.
Besides, external liquidity in India remained a concern and interest rates could go up.
The report also singled out India on external liquidity concerns and said most countries in the region maintained robust current account surpluses.
The agency also increased the projected growth rate for China in 2007 to 9.9 per cent from 9.5 per cent forecast in September.
Chinese economy is likely to grow at 10.4 per cent in 2006, it said.
"The overall Asian outlook for growth will weaken a little in 2007 compared to 2006, but strong domestic demand and some form of disconnect to the US demand should mean that Asia's growth stays relatively healthy," the report said.
It raised Asia's growth forecast to 7.9 per cent for 2007 from 7.4 per cent projected earlier, compared to a revised 8.2 per cent for 2006. In 2008, regional growth is pegged at 8.3 per cent, the report said.