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NEW DELHI (AFP) –
India's economy should expand by 7.2 percent this fiscal year, the government forecast Monday, as growth heads back to the robust levels seen before the global financial crisis.
The projection for the 12 months ending March 2010 was contained in an estimate by the statistics office for use in drafting next year's budget to be presented at the end of February.
The economy "has clearly turned," said chief government economic advisor Kaushik Basu while finance Secretary Ashok Chawla said growth this year could be even higher once data for the fiscal second half was known.
Monday's forecast marked an increase from the 6.7 percent growth posted in the previous financial year when India's economy was hit by the downturn in its major export markets.
HSBC economist Robert Prior-Wandesforde said this year's performance should "be trumped by an 8.5 percent increase" next year -- close to the nine percent average annual figure clocked by Asia's third-largest economy before the global financial system went into a tailspin.
The International Monetary Fund forecast late last week that India's economy would grow by eight percent next year as it said the country had posted an "early and vigorous recovery" from the financial crisis.
A surge in manufacturing, forecast to expand by 8.9 percent this year, and services, seen rising by 9.9 percent, has offset a sharp drop in India's farm output.
Agricultural production is expected to shrink by 0.2 percent as a result of monsoon rains in 2009 that were the weakest in nearly four decades.
India's rebound should give policymakers room to start unwinding aggressive fiscal and monetary stimulus put in place to shield the economy from the worldwide downturn, a top government planner said.
"We should say the stimulus has succeeded and we should begin to phase it out now," said Montek Singh Ahluwalia, deputy chairman of India?s planning commission.
The central bank cut benchmark borrowing costs six times between October 2008 and April 2009 to push interest rates to record lows while the government pitched in with higher wages for civil servants, tax and duty cuts and higher infrastructure spending.
Last month, the central bank took a key first step away from its ultra-loose monetary policy, telling lenders to put aside more cash as reserves, as it sought to check inflation riding at a 13-month high.
Industry leaders warned against any fast withdrawal of stimulus steps, saying economic recovery was still at a nascent stage.
"If monetary tightening is combined with a withdrawal of stimulus measures, it would be dangerous for the economy and employment," said Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry.
