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Economic growth of India to recover to 6% in 2009: ADB
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10:24, September 22, 2009

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The Indian economy is expected to grow by 6 percent this year, a stronger recovery from the global downturn as capital inflows, industrial production and business confidence soar, the Asian Development Bank (ADB) said in a report released Tuesday.

In the Asian Development Outlook 2009 Update, the bank said while agricultural output for 2009 is expected to remain stunted and exports weak, adroit economic management in the form of fiscal stimulus packages and accommodative monetary policy has minimized damage from the global financial crisis and is supporting a relatively strong economic expansion again.

The report forecast a growth of 7 percent for 2010, also an upward revision from the 6.5 percent projection in March.

"The government's strong fiscal stimulus, complementing the Reserve Bank of India's aggressive monetary policy easing, has successfully brought last year's economic slowdown to an end," ADB Chief Economist Jong-Wha Lee said in a press release.

The report said while the public expenditure-led growth strategy remains appropriate given global economic weakness, the growing federal and state government deficits are not sustainable in the long run.

One downside risk to the outlook for the economy is financial crowding out of private investment as a result of the government's stimulus program, the report said, adding that this risk is most likely to arise in 2010, and underscores the need for the government to follow through on its plans to make fiscal adjustments.

Another potential threat is that domestic food price inflation may create a dilemma for monetary management in 2009 as the Reserve Bank of India seeks to keep inflation expectations in check, but not to choke off a recovery, the report added.


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