India to grow by 8.5% in FY2010: ADB

India’s economy is set to expand by 8.5% in the fiscal year to March 2011 (FY2010) but persistently high inflation and a rising rupee could undermine future strong growth, says the Asian Development Bank (ADB) in a major new report. The Asian Development Outlook 2010 Update (ADO Update), raised its gross domestic product (GDP) growth figure for FY2010 to 8.5% from ADB’s April projection of 8.2%, while retaining its FY2011 estimate at 8.7%. Growth is being supported by robust investment, increased capital inflows, and stronger industrial output, buoyed by rising consumer demand. The current account deficit forecast was also adjusted to 2.7% of GDP in FY2010, from 1.5% previously to reflect a sharp pickup in trade flows, with exports projected to grow by 18% in FY2010, and imports by around 20%. At the same time, ADB raised its forecast for annual average inflation in FY2010 to 7.5%, up from 5% in April, warning that high food prices remain a near-term concern.