01-18-2008, 02:35 AM
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Economy heads for downslide
Pioneer News Service | New Delhi
<b>The double digit growth dream seems to be over. With sharp decline in manufacturing sector and consumer goods, the Government on Thursday scaled down the growth projection for 2007-2008 to 8.9 per cent.</b>
What has further set the alarm bells ringing is the grim projection of a slowdown by the international rating agencies. Moody's has said the growth target could dip as low as 8 per cent with an upper limit of 8.8 per cent while the world's biggest securities firm Goldman Sachs has projected lower GDP growth forecast at 7.8 per cent from 8 per cent for the year for India.
"Our current assessment for GDP growth rate in 2007-08 is marginally lower than our previous estimates in July 2007. The main difference stems from lower than expected expansion in manufacturing output and lower growth in the output of energy utilities," said a review of the economy for 2007-08, released by the Prime Minister's Economic Advisory Council Chairman C Rangarajan.
The growth scaling down is marginal for an year when the global economic trends were favourable, but with the US economy showing signs of recession, the election year ahead could be more challenging.
Treading on cautious grounds, Finance Minister P Chidambaram said on Thursday that drastic cut in interest rates by the US to avert a recession will affect India, but New Delhi will take steps to counter such an impact.
Without elaborating on measures that the country may initiate to insulate itself from a possible recession in the US, he told industry captains at the CII summit here that "India is not so dependent upon the US as some countries are. "Our exports to the US are significant, but not so significant that we will be gravely affected," the FM said. Responding to a query on the impact of a US slowdown on India, he said: "It will have some impact, of course."
"However, if the US, as a response to the slowdown, cuts interest rates very drastically that will widen the difference between the US interest rate and Indian interest rate and that has consequences like capital flow and faster appreciation of the rupee."
A better-than-expected growth rate in the farm sector has partially offset the lower expansion rate in manufacturing and energy. "<b>The agriculture sector is likely to grow by 3.6 per cent as against the earlier estimate of 2.5 per cent," </b>said Rangarajan. But referring to the growth prospects in 2008-09, he said the sub-prime mortgage crisis in the US and its effect on other European countries would have a bearing on India's growth.
Rangarajan had on Wednesday asked Finance Minister P Chidambaram to adjust indirect taxes on consumer durable goods to spur economy, which is expected to further slow down to 8.5 per cent next year.
Pegging down the growth estimate, Moody's economy.com, a subsidiary of the global credit rating agency, said, " Although fundamentals remain strong and its prospects upbeat after an impressive pace in 2007, the growth in India's domestically-driven economy would moderate in 2008 as domestic demand eases and exports cool."
"<b>Real GDP growth is expected to moderate to 8 per cent in 2008 from an estimated 8.8 per cent in 2007 as tighter monetary conditions dampen demand for credit and take some steam out of consumer spending," </b>Moody's economy.com's Asia Pacific Economics Director Ruth Stroppiana said in an outlook report on India.
India's development hurdles include "poor infrastructure and archaic labour laws", which deter development of the large scale manufacturing needed to boost employment, he said.
On Tuesday,<b> Goldman Sachs had said, "We are revising down our GDP growth forecast to 7.8 per cent from 8 per cent for FY09 due to a larger slowdown in external demand. We estimate that export growth will halve in FY09 to 9.8 per cent from 18.6 per cent due to global slowdown as well as rupee appreciation." </b>
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They should increase oil price, so that government had money to pay for other infrastructure project and maintaining Gandhi family.
Pioneer News Service | New Delhi
<b>The double digit growth dream seems to be over. With sharp decline in manufacturing sector and consumer goods, the Government on Thursday scaled down the growth projection for 2007-2008 to 8.9 per cent.</b>
What has further set the alarm bells ringing is the grim projection of a slowdown by the international rating agencies. Moody's has said the growth target could dip as low as 8 per cent with an upper limit of 8.8 per cent while the world's biggest securities firm Goldman Sachs has projected lower GDP growth forecast at 7.8 per cent from 8 per cent for the year for India.
"Our current assessment for GDP growth rate in 2007-08 is marginally lower than our previous estimates in July 2007. The main difference stems from lower than expected expansion in manufacturing output and lower growth in the output of energy utilities," said a review of the economy for 2007-08, released by the Prime Minister's Economic Advisory Council Chairman C Rangarajan.
The growth scaling down is marginal for an year when the global economic trends were favourable, but with the US economy showing signs of recession, the election year ahead could be more challenging.
Treading on cautious grounds, Finance Minister P Chidambaram said on Thursday that drastic cut in interest rates by the US to avert a recession will affect India, but New Delhi will take steps to counter such an impact.
Without elaborating on measures that the country may initiate to insulate itself from a possible recession in the US, he told industry captains at the CII summit here that "India is not so dependent upon the US as some countries are. "Our exports to the US are significant, but not so significant that we will be gravely affected," the FM said. Responding to a query on the impact of a US slowdown on India, he said: "It will have some impact, of course."
"However, if the US, as a response to the slowdown, cuts interest rates very drastically that will widen the difference between the US interest rate and Indian interest rate and that has consequences like capital flow and faster appreciation of the rupee."
A better-than-expected growth rate in the farm sector has partially offset the lower expansion rate in manufacturing and energy. "<b>The agriculture sector is likely to grow by 3.6 per cent as against the earlier estimate of 2.5 per cent," </b>said Rangarajan. But referring to the growth prospects in 2008-09, he said the sub-prime mortgage crisis in the US and its effect on other European countries would have a bearing on India's growth.
Rangarajan had on Wednesday asked Finance Minister P Chidambaram to adjust indirect taxes on consumer durable goods to spur economy, which is expected to further slow down to 8.5 per cent next year.
Pegging down the growth estimate, Moody's economy.com, a subsidiary of the global credit rating agency, said, " Although fundamentals remain strong and its prospects upbeat after an impressive pace in 2007, the growth in India's domestically-driven economy would moderate in 2008 as domestic demand eases and exports cool."
"<b>Real GDP growth is expected to moderate to 8 per cent in 2008 from an estimated 8.8 per cent in 2007 as tighter monetary conditions dampen demand for credit and take some steam out of consumer spending," </b>Moody's economy.com's Asia Pacific Economics Director Ruth Stroppiana said in an outlook report on India.
India's development hurdles include "poor infrastructure and archaic labour laws", which deter development of the large scale manufacturing needed to boost employment, he said.
On Tuesday,<b> Goldman Sachs had said, "We are revising down our GDP growth forecast to 7.8 per cent from 8 per cent for FY09 due to a larger slowdown in external demand. We estimate that export growth will halve in FY09 to 9.8 per cent from 18.6 per cent due to global slowdown as well as rupee appreciation." </b>
<!--QuoteEnd--><!--QuoteEEnd-->
They should increase oil price, so that government had money to pay for other infrastructure project and maintaining Gandhi family.