Indian economy to expand 8.5 pct: PM's chief advisory

Indian economy will grow 8.5 percent in fiscal year 2010-2011 and 9 percent in 2011-2012 on revival of agricultural sector, a report by Economic Advisory Council to the Prime Minister of India predicted Friday.

The growth forecast of 8.5 percent for the current fiscal year is higher from previous prediction of 8.2 percent and aligns with the growth target set by the Finance Ministry.

Indian agricultural sector is expected to grow 4.5 percent this fiscal year starting from April 1, compared with growth of 0.2 percent in the previous fiscal year.

Meanwhile, industry and service sector will rise 9.7 percent and 8.9 percent, respectively.

Named Economic Outlook 2010-2011, the report said India's domestic savings and investment will increase 37 percent and more than 34 percent this year, serving as the chief engine of growth.

The government is required to rein in inflation, improve farm productivity and infrastructure especially in the power sector for sustainable growth in the medium term and food stocks must be released so as to dampen increasing prices.

Indian headline inflation has topped 11 percent in March and is projected at 6.5 percent by March 2011 on normal rainfall and waning base effect.

The document holds that Indian central bank still has enough maneuvering room to send monetary tightening signals and the exit of expansionary fiscal policy is not only feasible but also necessary.

Additionally, capital inflow is expected to reach 73 billion U. S. dollars this year and 91 billion U.S. dollars next year from 53. 6 billion U.S. dollars in last fiscal year.

The report said that the incremental of capital inflow could be readily absorbed due to financing demand from brisk economy.

Indian current account deficit will expand to 41.8 billion U.S. dollars this year and 50.7 billion U.S. dollars next year, accounting for 2.7 percent and 2.9 percent of GDP, respectively.

Source:Xinhua