ADB ups growth projection for India

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A slowdown in industrial growth in July notwithstanding, Asian Development Bank has raised its projection for India's economic growth to 8.5 per cent during 2007-08 and 2008-09 from its earlier forecast of 8 and 8.3 per cent respectively.

However, the Manila-based multilateral development bank warned of inflation risks mainly due to food prices and forecast that inflation would remain steady at five per cent in the two fiscals.

"Robust investment, buoyant industrial expansion and moderate agricultural growth will ensure that India's economy remains on a solid growth path in 2007 and 2008, Manila-based ADB said in its Asian Development Outlook, 2007.

Indian economy grew by 9.3 per cent during the first quarter of this fiscal and at a scorching pace of 9.4 per cent in 2006-07, highest in the last 18 years.

The report warned that inflation risks persist and any shock to food prices could stoke price pressure.

"While the Indian economy has moved to a higher growth trajectory, a major challenge for policymakers is to find ways to expand the market-based reforms so that the benefits flow to all sections of the population," ADB Chief Economist Ifzal Ali said in a statement.

The report said accelerating growth and the capacity bottlenecks have piled pressure on prices that are also feeling the heat from fast rising prices for imported foodstuffs. Indian consumers are still being shielded from the costs of oil in the international market.