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Indian economy might grow 7.5 %: ADB

The Asian Development Bank said on Thursday it expects India's economy to grow 7.5 per cent in the year to March 2007.

india Updated: Apr 27, 2006 15:07 IST
Reuters
Reuters
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The Asian Development Bank said on Thursday it expects India's economy to grow 7.5 per cent in the year to March 2007 and anticipates further monetary policy tightening by the central bank to contain inflation.

ADB Chief Economist Ifzal Ali, in India ahead of next week's annual meeting in Hyderabad, said high oil prices were a matter of concern for a number of emerging economies including India, Indonesia and Thailand.

India imports 70 per cent of the crude oil it consumes, so any rise in oil prices raises fears of a spike in inflation in Asia's third-largest economy. Though the government caps retail fuel prices, pricey crude feeds into many other costs.

"We also see monetary tightening from RBI (Reserve Bank of India). That balances it off," Ali told reporters, when asked whether high oil prices will adversely affect domestic inflation.

India's central bank opted to leave its key short-term interest rate steady at 5.5 per cent in its monetary policy last week, when many in the market had expected it to raise rates.

The RBI said price pressures and inflation expectations had been contained, but warned it would respond if domestic or international conditions changed.

Government-controlled fuel prices in India have not risen this year despite an increase of nearly 20 per cent in US crude prices, which are now trading around $72 a barrel due to geopolitical risks, and hit record highs above $75 last week.

First Published: Apr 27, 2006 15:07 IST