'India may escape world slowdown'

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New Delhi, January 17:: A slowdown among developed economies may not have a significant impact on India but pressures from high oil and food prices would make managing inflation a challenge in 2008/09, a top government panel said.

The report released by C. Rangarajan, Chairman of Prime Minister Manmohan Singh's Economic Advisory Council, said India was expected to grow at 8.5 per cent in fiscal 2008/09 but listed several downside risks.

"The Indian economy is much less dependent on the external markets than the Chinese economy," the panel's review of the economy said.

"While some export demand compression is likely to put an additional burden on our exports of goods and services, it is unlikely to be large enough to significantly depress growth. However, the flip side to this is that the pressure on prices of oil, food and other raw materials is likely to continue, making inflation management in 2008/09 quite challenging."

The report said the economy would grow 8.9 per cent in 2007/08, slightly lower than previously expected due to slowing manufacturing expansion and sluggish output growth in power and mining.

Asia's third-largest economy has expanded at an average of 8.6 per cent over the past four years and is poised for another year at a similar pace in 2007/08.

India grew 9.4 per cent in the 2006/07 fiscal year, its strongest in 18 years and second only to China among major economies.

But annual growth dipped to 8.9 per cent in the September quarter, falling below 9 per cent for the first time in three quarters, as industrial output slowed due to monetary tightening designed to trim inflation.

FUEL PRICES AND INFLATION

Policymakers are confident of maintaining growth momentum despite a surge in the value of the rupee against the dollar, higher interest rates and record global crude oil prices. The report said the headline wholesale price inflation rate should go to a little over 4.0 per cent if domestic fuel prices are revised and remain stable around that level until the end of the fiscal year in March.

Inflation hit a two-year high of 6.69 per cent in January last year but softened after the RBI tightened policy and the government cut duties on a range of items to calm prices.