... says high oil prices, interest to hit growth

New Delhi, July 26 | Updated: Jul 27 2006, 05:30am hrs
The World Bank has said India, which has been growing at over 8% in the last few years, is likely to witness a slowdown in growth in the next couple of years primarily due to the rising interest rates and high global oil prices.

Rise in interest rates and high global oil prices will affect Indias economic growth for the next few years, World Bank country manager Michael F Carter said on Wednesday. Carter pointed out that prices are likely to increase due to the high global oil prices rices.

However, he said investments would not be affected much at the domestic level. He added slowdown of the global economy will have an impact on the countrys growth story, but internal factors may balance it. He pointed out that despite the fact India was gradually reducing fiscal deficit, it remained vulnerable to high oil prices. In addition, he observed that inflation rate may increase once full pass-through of high global oil prices was made in the domestic market.

Meanwhile, the World Bank is likely to extend over $2 billion to India in the fiscal starting from this July. It may also resume funding to the health projects, which have been postponed on corruption allegations. The bank had lent $1.6 billion in the last fiscal (July-June). The total lending during this fiscal is likely to be over $2 billion, Carter said. There has been some good progress and the discussions are on for resumption of lending to three health projects, held up on corruption charges, he said.