The Centre for Monitoring Indian Economy (CMIE) has said that there will be lower growth in 2008-09. CMIE has revised the real GDP growth forecast for the current fiscal from 9.4 per cent to 8.7 per cent.
According to CMIE, the real economy is largely insulated from the financial turmoil that is currently being seen in the equity markets.
"There is a liquidity crunch in the short term money markets. But, there is no serious credit squeeze for industry, yet. Given sufficient liquidity infusion, growth of the real economy is likely to remain robust," CMIE said.
Commenting on the downward revision of GDP numbers, at a time when the financial markets are in turmoil, CMIE said that its was not entirely because of the turmoil.
"The Indian equity markets fell the most in January 2008. Foreign institutional investors have repatriated $16.2 billion since February. Also, interest rates and inflation have been high for several months now. During this period of capital flight and tight liquidity, the Indian economy did quite well," CMIE said in a statement today.
However, analysing the economic growth for the current fiscal CMIE said that the real GDP grew by an impressive 7.9 per cent in the first quarter of 2008–09 and the exports grew by a robust 35 per cent in dollar terms till August in spite of global gloom.
Listing out the highlights of the economy in the current fiscal, CMIE said the imports registered a growth of 38 per cent in dollar terms till August partly because of high petroleum prices.
The non-oil imports witnessed 28 per cent growth in dollar terms till August reflecting strong domestic industrial demand while the direct tax collections grew by 33 per cent till September reflecting rising incomes and profits, it said.
During the current fiscal, there were all round growth.
"Railway freight movement grew by 8.6 per cent till August while the cargo on major ports registered a 8.4 per cent growth till August. FDI inflows also grew to $14.8 billion till August compared to $6.4 billion during the same period last year," CMIE pointed.
Rubbishing the claims of an industrial slowdown, CMIE said that the corporate sector sales grew by 35 per cent in first quarter of 2008–09 while new investment proposals continued to flow at the rate of Rs 5 lakh crore per quarter.
"The only poor indicator is the Index of Industrial Production that grew by 4.9 per cent till August. But, we believe that the IIP is seriously impaired and therefore not a good indicator of the economy’s health," it said.
An important factor in favour of sustained growth is that the RBI has shifted its stance in favour of enhancing liquidity and Sebi has signaled greater freedom to overseas investors. The Ministry of Finance has also sought to build confidence.
