GDP growth may slow to 6.5% : ADB report

The double whammy of higher oil prices and unfavourable weather conditions for agriculture, will slow the country's economic growth to 6.5 per cent in 2004, and an even lower level of 6 per cent in 2005, according to an Asian Development Bank (ADB) report released yesterday.

The Asian Development Outlook 2004 Update (ADO) has also lowered the rate of growth of most Asian countries in the wake of the oil crisis.

The update, revises the report, released in April this year by the Bank. The ADO is ADB's annual flagship economic publication for analysing and forecasting economic trends in the Asia-Pacific region.

The April report had made a growth forecast for India of 7.4 per cent in 2004 and a slightly higher rate of 7.6 per cent in the next fiscal.

The report says past experience shows that sharp spikes in oil prices trigger inflation and adversely impacts the balance of trade and dampens growth. The other associated risks include increasing global interest rates and inadequate progress in fiscal consolidation.

The ADO has projected an annual inflation rate of 5.7 per cent in the current fiscal, and 6.8 per cent in 2005-06. This was again predicated on the twin spike in oil prices and that of agricultural commodities.