India’s economy will expand at the slowest pace in seven years, with the World Bank, Asian Development Bank (ADB) and a grouping of developed nations expecting the country’s growth rate to be 4-5 per cent in 2009-10.
There is also little chance of the global economy staging a recovery during this year, although it might be able to stand up on its feet in 2010.
In its global economic forecast update for 2009, the World Bank projected a growth rate of 4 per cent for India during 2009-10, while the ADB, in its outlook, expects the economy to expand by 5 per cent.
A separate outlook by the Organisation for Economic Cooperation and Development (OECD), a club of developed countries, has forecast a 4.3 per cent growth rate for India.
India had last grown below this level in 2002-03, when the economy expanded by 3.8 per cent.
A likely recovery in the global economy next year may push India’s growth rate in fiscal 2010-11 to 7 per cent (World Bank forecast) and 6.5 per cent (ADB projection).
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Before the financial crisis hit the global economy, India had been recording a growth rate of 9 per cent or more.
The Central Statistical Organisation has projected 7.1 per cent growth in the year ending March 2009.
The ADB report warns of high fiscal deficits derailing future growth. “One downside risk that may jeopardise growth prospects is excessively large fiscal deficits, with domestic borrowing requirements of the government putting pressure on interest rates and restricting the availability of private credit and investment,” the report said.
The Centre’s fiscal deficit has widened to 6 per cent of GDP in the current fiscal, which led the government to borrow in excess of Rs 3,00,000 crore from the market.