India's economy will grow at rates of 7% and above in the coming quarters, helped by a recovering global economy and rapid expansion in domestic industrial output, a Reuters poll showed.
Analysts expect Asia's third-biggest economy to grow 7% in the 2009/10 fiscal year that ends in March, and 8% in 2010/11, up from forecasts of 6% and 7.5% in a similar Reuters poll three months ago.
"Growth drivers like industry and services and an improving business environment can support an economic growth of over 8%," said Shubhada Rao, Chief Economist at Yes Bank.
India's economy grew 6.7% in 2008/09, slowing from rates of 9% or more in the previous three years as the global credit crisis hit business activity.
Analysts expect the central bank to start lifting interest rates to tackle rising inflationary pressures as the economy rebounds, although they were divided over the timing of the first move.
Half of the 12 participating analysts said they expected the Reserve Bank of India to raise the repo rate at which it lends short-term funds to banks, by at least 25 basis points by end-March. The rest, with one exception pencilled in a rate rise in the following quarter.
Price pressures
Economists see the wholesale price inflation, India's main price barometer, spiking in the coming quarters as the impact of the weakest monsoon since 1972 keeps food prices high.
Wholesale prices rose 7.3% in December from a year earlier, its biggest annual rise since November 2008 and the full-year average is forecast to rise to 5.8% in 2010/11 from 3.4% in 2009/10.
In the previous poll, analysts forecast this fiscal year's wholesale price inflation at 2.8%, rising to 6% in 2010/11.
The rupee, which closed at 45.64/65 on Monday, is set to appreciate more than 6% between now and the end of fiscal 2010/11, the poll showed.
Source: ReutersCourtesy moneycontrol.com
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