OECD upgrades India growth to 5.9% for ’09

OECD upgrades India growth to 5.9% for ’09
The Financial Express, June 25, 2009, page 2

Press Trust of India

Paris, New Delhi: The OECD, a club of rich nations, on Wednesday raised India’s growth forecast to 5.9% for the current year and urged the new government to restore fiscal discipline and move ahead with disinvestment.

“With the gradual recovery of the global economy and easier financial conditions, growth is projected to gradually regain momentum,” said Organisation for Economic Cooperation and Development (OECD), a group of 30 developed nations.

The OECD, in March, projected 4.3% economic expansion for India in 2009. “In India, growth is predicted to slow to 5.9% in 2009 before accelerating to 7.2% in 2010 (March forecast was 4.3% and 5.8%),” the OECD said in its latest Economic Outlook report.

Pointing out that combined fiscal deficit of the Centre and state governments would go up to 11% of the GDP during 2009, the report said, adding, “The new government will face the need to restore fiscal discipline, speed up structural reform and increase sales of public sector assets.

“Any further easing in policy should be achieved through lower interest rates, rather than discretionary fiscal expansion.”

The report further said the extent of the deterioration in the fiscal position prior to the slowdown has reduced the scope for “discretionary fiscal policy action”.

The fiscal deficit of the central government, according to the interim budget data, went up to over 6 per cent during 2008-09 against the original estimate of 2.5%. Taking into account expenses on off-budget items like oil and fertiliser bonds, the total fiscal deficit on the centre has been estimated at around 8%.

The OECD’s forecast is much more optimistic than World Bank, which on Monday projected the Indian economy to expand just 5.1%. Prime Minister Manmohan Singh had recently said that he expects the country’s economy to grow by 7% in the current fiscal year (2009-10). Meanwhile, the Reserve Bank of India estimates the GDP to expand at a rate of 6% this fiscal year.