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Saturday, July 12, 2008

Growth to fall below 8%


India's economic growth is expected to fall below 8 percent amid likelihood of further tightening of monetary policy by RBI in the wake of inflation inching to 12 percent, said investment banker Goldman Sachs and global rating agency Moody's investor services.

While Moody's expects economic growth to slow down to just under 8 percent in 2008, Goldman Sachs sees it moderate to 7.8 percent this fiscal from 9 percent in FY 2008.

Moody's said even under 8 percent growth would be a cause of envy for most countries.

"India's GDP growth will moderate this year amid slowing exports and softening domestic demand. The retreat of the rupee in the March quarter helped enhance the appeal of Indian products in the global market, keeping export performance healthy," Moody's said.

Meanwhile, on the inflation levels in the country, it said that the wholesale prices jumped 11.9 per cent in the week ended June 28, showing no signs of cooling despite the reserve bank of India’s aggressive monetary tightening during the month.

"The higher interest rates and reserve requirements will take time to slow demand-driven inflation. However, if wholesale price growth the key inflation measure in India, continues to accelerate in the next couple of weeks, RBI looks set to further curb lending, which has been a major source of inflation," Moody's added.