Indian Economy to grow at 6%

     The Asian Development Bank (ADB), on Tuesday, maintained that the Indian economy could grow at an improved rate of 6 per cent during the current fiscal, provided reforms are put in place at a faster pace to sort out the structural bottlenecks and stem the deteriorating investment situation and a strong external demand is able to facilitate a turnaround in the worsening current account deficit (CAD).

    However, cautioned that its India projections on improvement in the economy were subject to a number of downside risks such as another bad monsoon, a slow pace of reforms and fiscal consolidation and a continued sluggishness in the global economic environment. 

Growth in GDP, Inflation, CAD

    

    According to ADB Country Director Narhari Rao, economy is expected to grow at the decade’s slowest pace of 5 per cent during 2012-13, mainly owing to a slump in services and weak consumption demand coupled with a contraction in exports and lower farm sector growth on account of a late monsoon, the ADB report has forecast a further pick-up in growth at 6.5 per cent in 2014-15 following an improvement in the global economic outlook and a consequent increase in India’s exports.

    The next two years, the report said, should see some improvement, with a normal monsoon likely to lift agriculture, and exports, industry and services expected to expand on stronger domestic and external demand. India’s inflation is seen at 7.2 per cent in 2013-14, easing back to 6.8 per cent the following year as government steps to raise diesel prices are completed.

    It also pointed out that reducing the fiscal deficit as targeted to 4.8 per cent of the GDP (gross domestic product) during 2013-14 from 5.2 per cent last fiscal would also help in raising domestic savings and encourage private investment. However, with the tax structure largely remaining the same, the cut in fiscal deficit would be heavily dependent on a pick-up in growth and continued revision in the prices of diesel, it said.

    As per its projections, CAD, which is estimated at 5 per cent of the GDP in 2012-13 on account of a deteriorating trade balance, is expected to moderate to 4.4 per cent in 2013-14 and to 3.7 per cent in the following fiscal year.