India to sustain 8% growth: UN report

India should be able to sustain its last three years' GDP growth rate of more than 8 per cent going forward over 2006-08, but high oil prices will remain a cause of concern.

Stating this, a UN report on Thursday said high global oil prices were exerting more inflationary pressure and eroding the balance of payments.

The report warned that if oil prices rise further by $10 a barrel, India's GDP growth can drop by half a percentage point, inflation increase by 1 per cent and the current account deficit widen up to 0.3 per cent of GDP.

Oil prices are currently hovering around the $ 66 per barrel mark. India is targeting to raise GDP growth to 10 per cent in the coming years.

The United Nations' Economic and Social Commission for Asia and the Pacific report added that India's high growth rate would come on the back of an expansion in the agricultural sector by 2.5 - 3 per cent, 8 per cent growth in industry and 8.5 per cent in services.

The report added that India's inflation rate is likely to remain at about 4 per cent during 2006-08, given the government's commitment to reform, including strict fiscal prudence and monetary discipline.

Industrial and services sectors are expected to sustain the growth momentum, helped by cyclical factors, rising rural incomes and increased public spending on physical and social infrastructure.

The report added that higher growth over the medium term would be feasible with sustained fiscal reforms by the state and the centre. Increased public and private sector savings will boost India's investment rate and provide resources for upgrading infrastructure.

The report added that while some increased use of foreign capital, particularly of FDI and portfolio investment, is consistent with external sector viability, the bulk of savings would need to be generated domestically.

On the whole, developing economies in the UNESCAP region grew by 6.6 per cent in 2005, down from growth of 7.4 per cent in 2004.

Notwithstanding the slight deceleration, performance in 2005 was remarkable in view of the increasingly adverse economic environment led by high oil prices, widening current account imbalances and a softening of global trade.