EIU forecasts India's GDP growth at 6.5% in FY10

India has overcome the worst of economic slowdown and may clock 6.5 per cent growth this fiscal on the back of robust industrial performance and positive macroeconomic indicators, the Economic Intelligence Unit (EIU) today said.

However, the agency cautioned about a likely tightening in interest rates in the early part of 2010.

"We expect real GDP growth in 2009-10 to average 6.5 per cent from the earlier 5.8 per cent, with an upside risk," EIU Director (Research) Manoj Vohra told reporters here.

The strong performance of industrial production and other macroeconomic indicators in recent months lead us to believe that the worst of the economic slowdown in India is now over, Vohra said, adding that there would now be a gradual upward movement.

"The country's GDP would reach 7.1 per cent in 2010-11 and growth will accelerate to 8 per cent in 2011-2012," he said.

Going forward, he forecast that Reserve Bank would increase interest rates in early-2010.

"The RBI will start to raise official rates in early-2010. We expect a hike of 1.25 per cent in interest rates in 2010," Vohra said adding, the Apex bank would continue to tighten monetary policy through tout 2010-11.

The repo rate would stand at 6 per cent by end-2010 (from the 4.75 per cent) and at 6.75 per cent by end-2011, he said.