Manmohan Singh may make policy changes to boost investment: ADB official

SINGAPORE: Prime Minister Manmohan Singh is expected to make policy changes in the Finance Ministry to attract much-needed foreign investment, a senior Asian Development Bank (ADB) official said here today.

"India needs foreign investment [to boost its economic growth] and I believe Singh will make changes in the Finance Ministry for that," said Iwan J Azis, Head of ADB's Office of Regional Economic Integration.

Singh's policy changes would open India to more foreign investments, Azis said after launching ADB's July issue of the 'Asian Economic Integration Monitor' here.

The Monitor forecast a 6.5 per cent growth for the Indian GDP in FY 2012 and 7.3 per cent in FY 2013.

"There are already positive signs," Azis said, referring to Singh's takeover of Finance Ministry since former Finance Minister Pranab Mukherjee left to contest presidential election.

He also pointed out that India would now benefit from the lower crude oil prices, lowering the cost of imports and easing the impact on trade deficit.

India's Gross Domestic Product (GDP) growth has been dampened by high inflation and trade deficits, which make it difficult to ease monetary policy, according to the Monitor's coverage of India.

It said the country's weak domestic demand has hampered growth, adding to the effect of a weaker global environment.

Economic growth was dragged down by low growth in capital formation and consumption, leading to a 5.3 per cent GDP expansion for the last quarter of financial year 2011, it noted.

Leading indicators also confirmed the continued slowdown, especially motorcycle sales and the infrastructure index remained low in May, said the Monitor.

Business optimism also continued to be lackluster. Domestic credit growth recovered only marginally after monetary easing by the Reserve Bank of India (RBI) in April while money supply increased substantially, adding to inflationary pressures, according to the Monitor.