ADB ups GDP forecast to 7% for 2009

The Asian Development Bank (ADB) today raised its growth outlook for the country to 7 per cent from its earlier 6 per cent for calendar year 2009.

"...India is now expected to grow 7 per cent in 2009, a full percentage point higher than projected in the Asian Development Outlook Update," the regional development bank said in a note today.

In September, the bank, in its Asian Development Outlook 2009 Update, had forecast that the country's GDP would grow at 6 per cent in 2009.

The Reserve Bank's GDP estimate is 6 per cent for the fiscal 2009-10, while the Planning Commission pegs it 6.3 per cent, both with upward bias.

ADB's upward revision follows the higher-than-expected second fiscal quarter growth of 7.9 per cent. The GDP grew 6.1 per cent in June quarter and 5.8 per cent in March quarter.

However, inflation is set to become a challenge, the bank noted. The wholesale price-based inflation shot up to 4.78 per cent in November from 1.34 per cent in October.

Besides, coordination between monetary and fiscal policy is important to moderate inflation while sustaining growth momentum in the second half of FY09, the bank said.

"Despite a V-shaped recovery now underway, it's essential that fiscal and monetary stimulus remain accommodative where possible to put economies on a sound footing," ADB said in a different note on emerging Asian economies.

"A key challenge for each economy will be to carefully time when best to roll back the stimulus to ensure sustained recovery but avoid both excessive inflation and hefty fiscal shortfalls," it said.