GDP likely to grow by 7.7%, says BankAm

New Delhi, Jan 5 | Updated: Jan 6 2006, 05:30am hrs
Booming manufacturing and services sectors are likely to push up Indias GDP growth to 7.7% in 2006-07, but inflationary pressure may lead to hike in interest rates, Bank of America said on Thursday.

However, the bank warned that cutting fiscal deficit as per FRBM Act is likely to remain a challenge in the absence of further budgetary reforms.

In India, GDP growth is likely to remain in high gear at 7.7% in 2006-67, as economic activity continues due to transition from the public to private sector, Bank of America chief economist Mickey Levy said in the report global outlook for 2006.

Growth is likely to be more evenly distributed among varying sectors, with the manufacturing and services sectors maintaining forward momentum and agriculture benefiting from a normal rainfall.

Rising income levels will see inflationary pressure mounting in addition to the effect of the gradual pass-through of higher fuel prices in 2005.

Wholesale price inflation is projected to average higher at 5.1% in 2006-07 compared to 4.6% in 2005-06 in part due to a low base this year, Mr Levy said.