India to grow faster than China in 2013: E&Y

Bolstered by industrialisation, India is projected to grow at a faster clip than neighbouring China with a 9% economic expansion in 2013, says a report by global consultancy firm Ernst & Young.

It cautioned, however, that India needs to tackle rising inflation and said the country's growth this year would be 7.2%, much lower than 8.2% recorded last year.

India's growth rate would rise to 8% next year, according to the report released today.

"The forecast pegs India's real GDP growth rate to be the highest among all the Rapid Growth Markets (RGMs) starting in CY 2013, when the economy is expected to growth 9.5%, followed by China at 9%," it said.

In 2014, India is expected to see an expansion of 9% while Chinese would see a growth of 8.6%.

The RGMs Forecast focuses on 25 nations -- including India, China, Brazil and Russia -- that display strong growth potential and are, or could be, strategically important for business.

India and China's would be able to better withstand a likely slowdown mainly on account of large size of their domestic markets as well as from beneficial effects of lower oil and commodity prices, E&Y said.

It pointed out that even though the overall outlook for India is positive, the country would need to address rising inflation.

Headline inflation, which has been hovering above the 9% mark since December 2010, stood at 9.72% in September.

"... Provided India's inflation does start to fall back by the end of this year and the US and EU economies do not slip back into recession, the soft patch for Indian growth should be relatively short-lived," the report noted.

E&Y said that once inflation is in check and interest rates are no longer rising, consumers would be more willing to spend. This would support a general improvement in business environment, resulting in steady acceleration in growth next year.

"India enjoys an advantage in its high savings and investment rates, currently a third of the GDP; relatively low GDP per capita on purchasing power parity giving significant potential for growth and continuing industrialisation and urbanisation," the report said.

E&Y India's Partner & India Markets Leader Farokh Balsara noted that India's consumption-led economy continues to make the country a highly attractive investment destination in the short to medium term.