|
|
 |
 |
 |
| Saturday, 14 August 2004 |
 |
|
 |
World | |
| News Business Features Editorial Security Politics World Letters Sports Obituaries
|
Slower growth looms for India as bad economic news sinks in NEW DELHI, Friday (AFP) India, the second-fastest expanding economy last year, is facing slower growth after being hit by a patchy monsoon, soaring oil prices and inflation at 42-month highs. Add to that the spectre of higher interest rates to rein in prices and it all adds up to a financial baptism of fire for the new Congress government, elected in May on a platform of spreading prosperity to India's poor. Analysts have already trimmed growth forecasts for the Asian giant to 5.5 percent to 6.5 percent from seven to eight percent for the financial year ending in March 2005. Economists say the "dream team" of Prime Minister Manmohan Singh and Finance Minister Palaniappan Chidambaram, seen as staunch reformers, will have their work cut out for them to ensure the damage does not worsen. But with seven months left in this financial year, the global economy seen to slow and world oil prices at record highs, the outlook for India, which relies heavily on imported fuel, could darken further. "I want us to grow at 6.5 percent... but I would rather be prepared for the worst," said Omkar Goswami, founder of economic consultancy CERG Advisory. India's economy was the second fastest growing last year after China's, expanding by a scorching 8.2 percent, helped by the best monsoon rains in a decade that fuelled demand in the farm-dependent nation. This year has been a different story. Economists say the effect of the stop-go monsoon, a lifeline for India where more than 600 million out of its billion plus people rely on agriculture for their livelihood, is still unclear. The rains are at last soaking vital crop-growing areas in India's northwest but may be too late to rescue harvests and are still 15 percent below normal. Healthy rural incomes are key to industrial, consumer and other demand. "We still don't know how badly agriculture has been hit," said Saumitra Choudhury, economic adviser to credit rating agency ICRA. Spiralling oil prices - India relies on imports for 70 percent of its crude needs - and their effect on inflation, riding at a three-and-a-half year high of 7.51 percent, are another big worry. Oil prices that are nudging 45 dollars a barrel will not only fuel inflation, they will also hurt Indian growth by lowering consumption and slow economies around the world, reducing the country's exports, economists say. On the inflation front, the government has already signalled the central bank could raise its trend-setting interest rate, now at six percent, to curb price rises. |
|
News | Business | Features
| Editorial | Security
Produced by Lake House |
