The Hindu Business Line : CMIE retains GDP growth forecast at 9.5%

Private economic research firm, CMIE, has retained its GDP growth projection at 9.5 per cent for the current fiscal, despite fears of high inflation and slowdown in industrial output.

In its May issue of the monthly review, CMIE said, “We expect the Indian economy to continue on its robust growth trajectory, clocking a 9.5 per cent growth in 2008-09”. This is higher than the 8-8.5 per cent growth projected by the Reserve Bank of India in its annual policy statement for 2008, released last month.

CMIE has based its projections on various assumptions. It said the factors which were earlier hinting at a possible slowdown have turned out be false alarm or less potential than feared.

The rapid rise in inflation had led to fears of the RBI tightening its monetary policy in April. But the RBI had only hiked CRR and not any policy rates. CMIE said the slowdown in GDP and the IIP growth figures witnessed in the December 2007 quarter was only an aberration and the economy would continue to grow at brisk pace backed by the huge capital investments happening in the country.

The review said projects worth Rs 3.4 lakh crore scheduled for commissioning would generate employment, and hence, demand for primary and intermediate goods and their completion would eliminate the supply side constraints currently faced by a few sectors. Even if all these projects are not commissioned in 2008-09, their implementation will generate employment, and hence, demand for goods. The low growth of 4.9 per cent and 5.8 per cent in the IIP in November 2007 and January 2008, respectively, and the meagre 2.3 per cent growth reported in production of capital goods in January 2008 had led to fears of possible slowdown in the demand and industrial activity. However, IIP bounced back in February 2008, making a healthy year-on-year growth of 8.6 per cent.

OIL PRICE

The international crude oil prices crossed $120 a barrel. But, CMIE said oil price will unlikely to have any impact on the demand for goods and services as Indian consumers are well protected through administered pricing.

The oil prices has also not hurt the balance of payments as the strengthening of the rupee against the dollar partially mitigated the rise in prices.