India will continue to tread on high growth trajectory in the year 2008, albeit at slower pace with high interest rates and appreciating rupee expected to moderate the pace of economic expansion, leading global financial services information firms say.
The Economy would record high growth rates as the service sector, which accounts for more than 50 per cent of the country's GDP, is expected to be robust with double-digit growth rates, besides agricultural output also benefited from good monsoon, Germany-based Allianz Dresdner Economic Research said in its latest report on Economy and Markets.
However, on the other hand, high interest rates affected the industrial production and dampned the manufacturing sector and private consumption expenditure, financial services information provider Dun & Bradstreet says in its study.
The cumulative industrial growth from April-October period was marginally down to 9.7 per cent, from 10.1 per cent during the corresponding period last year.
The 11.8 per cent growth rate in IIP during October this year is attributable to the low base of the previous year, and a reversal of this phenomena is expected for November 2007 March 2008 period, global business information provider Dun & Bradstreet India said.
Dresdner Bank predicts that the overall we expect GDP growth of a good 8 per cent for both this year as well as 2008, while as per Dun & Bradstreet India GDP growth, is expected to moderate during second half of FY 08 and average at around 8.7 per cent during the current fiscal.
"Given current elevated interest rates, a strong rupee, widening trade deficits, and the base effect, we expect growth in IIP to moderate and stand at an average of about 9.5 per cent in financial year 2008," D&B India COO Kaushal Sampat said.
Earlier, Finance Minister P Chidambaram had attributed the slower 8.9 per cent economic growth in the second quarter this fiscal, partly to tight monetary stance of the Reserve Bank. But he expected the growth rate to touch close to nine per cent this fiscal.
Economic growth slowed down to 8.9 per cent in the July-September quarter from 10.2 per cent in the corresponding period last year. It was at 9.1t per cent in the first half of this fiscal.
The growth momentum of the Indian Economy is expected to continue despite various dampeners because at this moment, as capital is literally flooding the Indian market. Besides the recent 25 bps reduction in the US Fed rate would further lead to strong inflows, Allianz Dresdner Economic Research said in its latest report on Economy and Markets.
Currency reserves ballooned this year by more than 80 billion dollars to 260 billion dollars. In the first ten months, net funds to the tune of over 25-billion dollar foreign portfolio investment and around 10-billion dollar direct investment flowed into India, the bank added.
The influx of funds was also boosted by the higher amounts being borrowed by Indian firms abroad and the rise in deposits at Indian banks of Indians living abroad.
India would continue to attract foreign funds due to high economic growth and buoyant capital Markets despite various measures taken by the Reserve Bank to tighten money supply and market regulator SEBI's decision to impose curbs on Participatory Notes, the report said.
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