Indian economy has bottomed out: S&P

Indian economy has bottomed out: S&P
The Hindu Business Line, August 14, 2009, Page 15

Our Bureau, Mumbai

The Indian economy has bottomed out and is set for positive growth in 2010, according to Standard & Poor’s 2009 Asia Pacific Mid Year Market Outlook

In view of the fiscal and monetary measures, robust domestic demand, and an overall improvement in the global economy, the rating agency has pegged India’s GDP growth in the 5.8-6.3 per cent range this year and 6.8-7.3 per cent range in 2010. In a teleconference, Dr Subir Gokarn, Chief Economist, S&P – Asia Pacific Region, told the media that macro-economic numbers indicate a turning point in the Indian as well as global economy in the first half of 2009.

Explaining the turnaround, Dr Gokarn said the country’s GDP will be driven by strong domestic consumption, which has been held up by stable rural demand and the recent hike in public sector salaries.

However, he cautioned that high inflation, interest rate pressure and persistent sluggishness in global growth could be a drag on India’s growth.

Asia-pacific region

With a faster than expected growth in demand for credit from the private sector, there is also a possibility that future government borrowing could crowd out private investors.

The swine flu pandemic would have negligible impact on the economy, he added.

Commenting on the growth prospects for the Asia-Pacific region, he said China, India and Indonesia will continue to lead with strong growth in GDP.

China played an important role in the economic turnaround of the region as Asian countries have increased their share of exports to China while decreasing there reliance to the US markets.

However, the US continues to be critical to the growth of the Asia-Pacific region, he added.