India's Economy To Grow 7.5 Per Cent In Fiscal Year Ending March 2014, Says ADB.

NEW DELHI, April 12 (Bernama) -- India's economy is expected to grow by 7.5 per cent in the fiscal year ending March 31, 2014, supported by a recovery in the global economy and resolution of some of the structural bottlenecks, the Asian Development Bank (ADB) said.

For the current fiscal year of 2012/13, the gross domestic product (GDP) growth will nudge up to seven per cent based on assumptions for growth in industrial countries and oil prices, as well as expected moves toward monetary easing coupled with a budget deficit reduction, it said.

For the just concluded fiscal year, it said the GDP grew by 6.9 per cent.

"Sustaining the progress against inflation in the 2012 financial year depends on macroeconomic policies and structural reforms," said the Philippine-based ADB in its report, "Asian Development Outlook 2012:Confronting Rising Inequality in Asia".

Inflation, it said, is expected to continue to decline in 2012 due to the strong base effect, normal monsoons in 2011, weakening global commodity prices, and lagged impact of monetary policy on expectations suppressing demand-side inflation.

"Consequently, the inflation is expected to ease to seven per cent.

"Depending on how structural food price pressures and the extent of fiscal consolidation is tackled, it will ease further to 6.5 per cent in 2013.

"Moderation of growth in the advanced economies will adversely impact exports as well as receipts on account of software and business services," it added.

The ADB has also forecast export growth to slip to 14 per cent in 2012, while remittances are expected to show strong growth, as banks are now free to set rates in response to market forces.

India's current account deficit is forecast to improve marginally to 3.3 per cent of GDP in 2012.

Improved economic prospects in the advanced economies are expected to boost export growth to 19.0 per cent in 2013.

At the same time, an uptick in domestic growth will increase import demand, leading to imports growing by 18 per cent, the ADB said.

It also said that strengthening economic activity in the advanced countries is seen encouraging services exports, leading to the current account deficit moderating to three per cent of GDP in 2013.

Portfolio investment is expected to be relatively volatile, and be influenced by the extent of investor risk aversion, global liquidity, and improvement in domestic fundamentals.

As for Foreign Direct Investment (FDI), the ADB said it is likely to increase only modestly.

"However, external borrowings are set to remain healthy given the interest rate differential with advanced economies.

"The current account deficit is expected to be financed by capital flows," it added.

Source : bernama.com