Economists see robust growth in FY09

We should expect from all the global projections that next year is going to be a very difficult one for the global economy, the year 2009.” That was Planning Commission deputy chairman Montek Singh Ahluwalia, announcing the second instalment of the government’s fiscal stimulus. However, opinions vary on the subject; some other economists expect growth to be more robust next fiscal. This is the final stimulus package, said Mr Ahluwalia. So the next package, if any, will have to wait for a new government to be installed at the Centre — by June 2009, that is. The moot point is whether the growth momentum set off by the fiscal and monetary policies announced so far would sustain and build on itself. The Indian economy can grow above 7% in the next financial year, says policymakers and economists, the caveat being proper implementation of the infrastructure projects already announced and economic agents, financial institutions and investors, taking decisions based on objective views. They brushed aside as “irrational” forecasts that next year’s growth rates would be lower than in the current year. Prime Minister's Economic Advisory Council (EAC) chairman Suresh Tendulkar expects over 7.5% growth next fiscal. “If the government succeeds in pushing implementation of infrastructure projects, cash-rich corporates, though bottom lines of some are hit, they are still cash-rich, keep the flow of services and goods moving and economic agents (banks, investors and borrowers) take objective decisions, the economy can grow at a rate of at least 7.5% in next financial year,” Mr Tendulkar said. He believes that dimensions of the financial crisis have been magnified by irrational expectations about the impending doom. Investment activity, which has slowed down on the back of low business confidence, will rebound in the second half of the next financial year, believes Saumitra Chaudhari, EAC member and economic advisor at rating agency ICRA. ”The contraction in advanced economies will be over within the next two quarters. I am expecting the Indian economy to rebound on the back of stornger investment activity in the second half of the next financial year, pushing the growth rates for next fiscal above 7%” said Mr Chaudhari. Rating agency Crisil’s principal economist DK Joshi expects the financial markets to improve from now on. Mr Joshi said, “Monetray measures taken by the central bank is adequate to pump-prime the interest rate sensitive sectors. Though the export-oriented sectors might take some time to recover, I expect the growth rate in domestic demand driven segments to pick up within the next two quarters.” The growth rate will be around 7% in next financial year if the promised government spending translates into actual expenditure and global growth rate bottoms out.” Indian Council for Research on International Economic Relations Director Rajiv Kumar begs to differ. Although the central bank and the Union government have left no stone unturned in an attempt to stimulate the flagging economy, there would be a 6-7 month time lag before the effects settle in. “With the global conditions remaining as bad as they are, I expect the growth rate for the first half of the next financial year to hover below 5%. If the situations improves in the second half of the next financial year, we can expect a growth rate close to 6.5% for the whole year,” said Mr Kumar. The last word, however, goes to Mr Ahluwalia. “I don’t think we should focus too much on precise numbers. This is a world of considerable uncertainty. At 7%, we would be the second fastest growing developing country and our growth rate would be much higher than anything the developed world is experiencing. It will not be a bad performance,” he said.