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ADB Projects India's FY13 GDP At 7%

4/11/2012 2:13 AM ET

Asian Development Bank or ADB said on Wednesday that India should see a moderate uptick in growth during FY 2012-13 and FY 2013-14, as global conditions stabilize, but a return to the very strong performance of recent years hinges on moving the reform agenda forward, especially addressing issues that are constraining investment.

ADB's flagship annual economic publication 'Asian Development Outlook 2012 or ADO 2012 said India's gross domestic product growth should edge up to seven percent in FY 2012-13 and 7.5 percent in FY 2013-14 after falling to 6.9 percent in FY 2011-12 and 8.4 percent the year before.

The Indian government, however, has projected a growth rate of 7.6 percent for the current fiscal and Reserve Bank of India (RBI) is slated to come out with its forecast the next week.

ADB's Chief Economist Changyong Rhee said, "An expected easing in monetary policy after a long period of persistent inflation and rate hikes might help stimulate investment over the coming year, but its impact is likely to be limited until obstacles like land purchase and environmental regulations, which are currently deterring both domestic and foreign investors, are addressed. "

A number of bills and measures to improve India's investment environment have been introduced in Parliament, but they are making little progress amidst lack of sufficient consensus for immediate reforms, said ADO.

On inflation, ADB said, it eased late in the year, after 13 consecutive policy rate increased by the RBI, but a sharp first-half pickup in exports was not sustained in the second, as global demand fell.

The dip in inflation would continue on the expectation or normal monsoons and more stable global commodity prices, with the average rate expected to be seven percent in FY 2012-13 and 6.5 percent the following year, it said.

However the longer-term outlook for consumer prices will also depend on structural reforms to improve production and distribution of food, as India's consumption patterns and incomes change.

It further stated that moderation in the growth of non-oil imports in FY 2012-13 and improved economic prospects in the advanced countries in FY 2013-14 are expected to help the current account deficit to improve to 3.3 percent in FY2012-13 and further to three percent in FY 2013-14.

by RTT Staff Writer

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