India's GDP growth to slow to 8% in 2008: Calyon
The softening of global demand should slow exports of goods and services to some extent in the coming months. Challenges for India Inc
By PTI |
MUMBAI: India's gross domestic product (GDP) growth may slow to 8 per cent this year from 8.5 per cent in 2007 as the impact of the central bank's tightening begins to show, Calyon said in a research report on Tuesday.
"We do not expect much more monetary tightening in H1 2008, but the economy may continue to feel the impact of past tightening measures," Sebastien Barbe, analyst at Calyon, said in the Asia Outlook and Strategy report for 2008.
The Reserve Bank of India (RBI) increased its short-term lending rate five times between June 2006 and March 2007, but has left it unchanged in the three policy reviews since then.
"The softening of global demand should slow exports of goods and services to some extent in the coming months." India, the world's fastest-growing major economy after China, grew 9.4 per cent in the year ended March 2007, the fastest in 18 years, and RBI expects it to slow to 8.5 per cent this year.
The RBI has also raised banks' cash reserve ratio by 250 basis points since December, 2006 with the latest 50 basis point increase in November.
"We do not expect much more monetary tightening in H1 2008, but the economy may continue to feel the impact of past tightening measures," Sebastien Barbe, analyst at Calyon, said in the Asia Outlook and Strategy report for 2008.
The Reserve Bank of India (RBI) increased its short-term lending rate five times between June 2006 and March 2007, but has left it unchanged in the three policy reviews since then.
"The softening of global demand should slow exports of goods and services to some extent in the coming months." India, the world's fastest-growing major economy after China, grew 9.4 per cent in the year ended March 2007, the fastest in 18 years, and RBI expects it to slow to 8.5 per cent this year.
The RBI has also raised banks' cash reserve ratio by 250 basis points since December, 2006 with the latest 50 basis point increase in November.
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The challenges to the growth will come from a high government deficit, with the fiscal balance remaining at approximately 6.5 percent of GDP, which is relatively high compared to other Asian economies, Barbe said.
Calyon remains optimistic about Indian currency's rise in the medium term. "We look for dollar-rupee to reach 36 at end-2008 and 35 at end-2009, which is consistent with our optimistic medium-term outlook for the Indian economy," Barbe said.
However, he cautioned that high oil prices in the medium-term and the resulting widening trade deficit as well as risks of capital market outflows will impact the rupee, which hit a near decade high of 39.16 per dollar in November.
"India has welcomed huge portfolio investments over past few quarters, which makes equity market and the vulnerable to possible rise in risk aversion," it said.
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