Barclays revises India's GDP projection to 7.2%

Financial services provider Barclays Capital today revised India's growth rate projection upwards, from 5.5 per cent to 7.2 per cent for this fiscal on the back of recovery in consumer spending.

In a research report, the firm said that the initial stages of recovery in India's economic scenario will be driven by a strong pick-up in inventories and investment supported by easing credit conditions.

Barclays said that the recovery "will be motivated by the lagged impact of the loosening of monetary policy and reduction in the panic seen among corporates and banks".

Moreover, it added that the lagged impact of fiscal stimulus, will be also be an important driver of growth in 2009-10 and should support the recovery in consumer spending, which seems to have already started.

In fact, the firm expects RBI to tighten money supply later this year. It could hike short-term borrowing rate( reverse repo), by 50 basis points later this year, followed by hike in short-term lending rate (repo) and cash reserve ratio.

Indian economy surprised most analysts by posting a reasonable growth of 6.7 per cent last fiscal, much in line with RBI's projections.