Deutsche Bank pegs India's growth rate at 7%

Deutsche Bank expects India's growth rate to continue and has pegged it at seven per cent for the current fiscal.

However, Norbert Walter, chief economist of Deutsche Bank Group has expressed concern over the willingness of the government to support the privatisation process. The bank has thus predicted a lower growth rate of 6.5 per cent subsequently.

Walter said that international investors were surprised over the outcome of the elections, and added "it would be necessary to re-orient ourselves even as the key personalities of today's government seem to reassure the continuation of reforms."

But he called the government's decision to open the skies to international airlines for a period of three months rubbish.

"This is complete rubbish as no one can reschedule flights for a short period and hence is a phony suggestion," Walter said.

At the same time, Walter does not expect the inflation level to get out of hand, betting on 4.4 per cent for India. "This is due to better behaviour of oil prices. With the economy growing at the rate of 6.5-7 per cent, there is no need to assume a pressure on prices. Basically international oil prices will make a difference to the inflation figures," he pointed out.

He said that though the strategy for Asia has changed, "we continue to be very interested in India and hope to play a greater role in the privatisation process."

Walter however, warned that since significant portion of India's foreign exchange reserves is currently through portfolio investment, this could prove to be unstable for the country if there is a hike in the US Fed rates.

Remarking on his expectation for the US, Walter said it all depended on who came into power. If it is George Bush, then Deutsche Bank sees higher bond rates and a continuation of fiscal expansion, with more forceful continuation of tax reduction.

"On the other hand, if John Kerry is elected, then with lower military expenditure and less forceful tax cuts, "we can expect lower interest rates", said Walter.