Monetary tightening to contain overheating as well as inadequate infrastructure is likely to slow down India's growth to a moderate 8% next fiscal against the expected 9.2%, the Asian Development Bank (ADB) has forecast.In a report, 'Asian Development Outlook' released today, the multi-lateral agency said the economic growth will again pick up in 2008-09 to stand at 8.3%.The situation could have been worse if the government had not taken fiscal consolidation measures, Narhari Rao, India chief economist, ADB, said.Even at the current pace of infrastructure development, the economy could expand at 8%, but 9% and double-digit growth requires infrastructure to expand at much faster rate, he said.ADB also forecast inflation to come down to a "tolerant" level of 5% in both 2007-08 and 2008-09 from the present over 6%.This is expected to be the result of tighter monetary policy, a rise in agricultural planting, an expected good spring harvest and cuts in import duties on key commodities.The report said domestic overheating is raising demand and has been forcing RBI to respond by raising interest rates.Rising interest rates will first dampen property demand and then have subtle and wide-ranging consequences in other components, the report said."These restraints on demand growth from home buyers, manufacturing investors and consumers will be accompanied by fiscal discipline...These forces are expected to moderate growth rates bringing it down to 8% in 2007-08," the report said.
