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| Indian economy to grow by 8.2% in FY11: Goldman |
| Press Trust of India / Mumbai Dec 04, 2009, 21:27 IST |
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Indian economy may expand by 8.2 per cent next fiscal on robust domestic demand, especially from infrastructure sector, Goldman Sachs said in a report today.
"We forecast real GDP to grow by 8.2 per cent in FY11 and 8.7 per cent in FY12, on the back of an acceleration in domestic demand," the report said.
Reforms in infrastructure, fiscal and financial sectors by the respective policymakers would also be critical for the country to return to the high growth path, it said.
The Reserve Bank had lowered key policy rates last year in the wake of global economic recession. The government, too had steeped in and announced several stimulus packages to prop up the sagging economy.
The Wholesale Price based inflation, which has started inching up now, is likely to go to 6.5 per cent by March, 2010 due to rising food and commodity prices, the report said.
The agency also said the Reserve Bank may hike its policy rates in 2010, starting in January, by hiking repo and reverse repo rates.
Goldman expects 300 basis points of effective policy tightening starting in January with the Reserve Bank hiking the repo and reverse repo rates, it said.
This will constitute removal of monetary accommodation (by the central bank) and moving rates to neutral, it said.
Moreover, Goldman Sachs said the governement's fiscal deficit is likely to decline to 6 per cent of GDP in FY11 from 6.8 per cent this fiscal.
Besides, the Centre's gross market borrowings in FY11 is unlikely to be higher than in FY10, despite a large amount of bonds coming due in the course of the year, it said.
The report, however, highlighted that commodity prices are likely to be a key risk for the economy in the period ahead.
"A poor summer crop if followed by further deterioration in the winter crop or a bad monsoon in 2010 could have a much larger impact on the economy than the failure of the rains in 2009," it said.
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