Economic growth to moderate to 7.8% in 2008-09: Economist

NEW DELHI: India's economic growth rate is expected to moderate to 7.8 per cent in 2008-09, mainly on account of a global slowdown, says the Economist Intelligence Unit (EIU), an arm of London-based magazine Economist.

The Indian economy, according to government estimates, is expected to grow at 8.7 per cent during 2007-08.

Despite moderation in growth, India would continue to remain the second-fastest growing economy in Asia, said senior economist and Asia Editor of the EIU Anjalika Bardalai while briefing reporters ahead of the 13th business round table with government officials on Tuesday.

The growth will mainly be driven by the services sector with IT and IT enables services (ITeS) playing a major role, she said, adding that "in the coming years, the sector will see a major growth".

In the long run, she added, India's innovation in the engineering sector and R&D services would lead the growth story.

Among the major challenges, Bardalai said: "India currently faces threats like those of high inflation", which surged to as high as 5.92 per cent last week due to rise in prices of food items.

Referring to EIU's business environment ranking, she said India ranks fourth in Asia and Australasia in terms of available market opportunities, though its ranking was quite low on other parameters.

Speaking on the occasion, senior economist with ABN Amro Bank Gaurav Kapur said the country needs to "maintain low and stable inflation which could rise to as high as 6-6.50 per cent in the next three to four months."