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ADB projects better growth for India in 2006
By agencies
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Friday, 09 September 2005, 19:30 IST
NEW DELHI: The Asian Development Bank (ADB) has raised its growth forecast for India for 2006-07 from 6.2 percent to 6.8 percent. The growth forecast for 2005-06, however, remains 6.9 percent, the same as given in its Asian Development Outlook 2005, released earlier this fiscal.
Indias outlook continues to look bullish in 2006, lifting the sub-regional average for South Asia to 6.6 percent compared with 6.2 percent forecast in ADO 2005, said the Asian Development Outlook 2005 Update. ADO is a supplement to ADBs flagship publication that forecasts economic trends in the region.
The growth forecast for China has also been scaled up to 9.2 percent in 2005-06, up from 8.5 percent projected earlier. The forecast for Chinas next fiscal is 8.8 percent, against 8.7 percent forecast in the ADO.
However, rising oil prices would cause a great deal of uncertainty because India relied heavily on oil imports and was relatively energy inefficient, it said.
If prices are at about $70 a barrel through end-2006, growth could be clipped by up to 1.1 percentage points -assuming that other things are equal, it said. It added that the impact was expected to be offset by positive effects like the initiatives on infrastructure.
The Bharat Nirman Program, for which the government will spend over Rs 1,740 billion in six rural infrastructure areas over four years, will create additional demand for steel, cement and other manufactured goods. This would push the industrial growth up in 2006-07.
The import bill could be accommodated by healthy foreign exchange reserves, but the effect of increased costs on producers and consumers were more difficult to predict.
Under recoveries of costs, being borne by oil marketing companies, were beginning to result in cash-flow management problems.
The outlook for high global prices had led to revisions in the forecasts for inflation, imports and current account, it said.
The inflation rate based on the wholesale price index was now expected to touch 4.8 percent in 2005-06, against the earlier forecast of 4.2 percent, according to the ADO Update. Current account deficit was expected to go up from 1 percent of gross domestic product (GDP) projected earlier, to 1.5 percent now.
In the next fiscal, inflation was expected to touch 3.3 percent, against the previous forecast of 3 percent. Current account deficit was expected to be at 1.8 percent, against the earlier forecast of 1.4 percent of GDP.