ADB expects higher Indian growth in 2002

WASHINGTON, NOV. 13. India's refusal to go the whole hog on globalisation is turning out to be its best economic defence in the current global downtown, says the Asian Development Bank (ADB) in its latest study.

Next year, as the global economy picks up, Indian growth, projected at 5.3 per cent to 5.8 per cent in 2001 against 5.2 per cent in 2000, is expected to rise to 6.1 per cent to 6.5 per cent of gross domestic product (GDP), ADB says in its updated 2001 Development Outlook. It also notes India's `comfortable' foreign exchange reserves and `a low current account deficit.' ``Given the still limited openness of the Indian economy, however, the possible negative impacts on the balance of payments are unlikely to be significant, especially when considered in the present context of comfortable foreign exchange reserves and a low current account deficit," the bank says.

``The dampening effect on external demand of a deeper and more prolonged global slowdown is likely to be counter-balanced by a pickup in domestic demand if expectations of a strong performance in the agriculture sector materialise."

The bank says revival of agricultural growth in India would be accompanied by a moderate improvement in industry and services sector performance in the latter part of fiscal year 2001. However, given the increased uncertainty of global economic scenario, India's GDP growth is expected in the range of 5.3-5.8 per cent in 2001 against a growth rate of 6.2 per cent in ADO (Asian Development Outlook) 2001.

For 2002, GDP growth in India is projected in the range of 6.1 per cent to 6.5 per cent as industry and services sector growth gain further momentum. Realisation of the high-end forecast in 2002 would depend on an improved global environment and on the Government's accelerating pace of reforms necessary both to improve fiscal performance and to address structural issues in the economy. In a domestic environment characterised by stronger fiscal discipline, inflationary pressure might be managed effectively. Under this assumption, inflation would remain moderate at around 5 per cent in 2002, the study says.

According to ADB, with subdued export and import growth, the current account deficit may be below one per cent of GDP in 2001. Stronger external demand and initial improvements in export competitiveness due to progressive removal of factor market distortions are likely to improve export performance to some extent in 2002.

As an increases in industrial output may be realised initially through employing the current sizable excess capacity in the industry sector, import growth may be contained during 2002 and, with a stable invisibles account, the current account deficit is likely to be maintained at about one per cent.

- PTI

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