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Economy to grow 7.2%
New Delhi, Feb 8 (Agencies)
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Published on 8 Feb. 2010 11:57 PM IST
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India’s economy is expected to grow a healthy 7.2 percent in the current fiscal, higher than last year’s 6.5 percent growth, the government said on Monday, further reinforcing the belief that Asia’s third largest economy is fast emerging out of the slowdown, reports Zee News. According to the Central Statistical Organisation, the economy the manufacturing sector, the driving force of the faster-than-expected recovery, will expand 8.9 percent in 2009-10. The official growth forecast is line with other estimates this month and comes amid speculation that the country’s central bank could raise interest rates even before its next policy review in April to dampen inflation. The Reserve Bank of India (RBI) and key officials of Prime Minister Manmohan Singh’s government have revised their initial forecast for the fiscal upwards following a surprising growth rate of the second quarter. The economy expanded by 7.9 percent in the quarter, driven by a sudden uptake in industrial production. India’s factory output reported 11th straight month of expansion in November at 11.7 percent. Consumer durables production shot up 37.3 percent in the month from a year earlier, while manufacturing output grew 12.7 percent. The exports sector, worst hit by the global slowdown, is also on the recovery path, latest government data indicate. In December, exports rose an annual 9.3 percent to USD 14.6 billion, the second consecutive rise after 13 straight months of decline. Though the economy is fast returning to high growth trajectory, inflation remains a major concern for the government, say policy analysts. India’s headline inflation jumped to a one-year high of 7.31 percent in December, mainly driven by high food prices. Food inflation is ruling above 17 percent, putting enormous pressure on the government to take policy actions. RBI last month revised its wholesale price index inflation forecast for the fiscal to 8.5 percent and raised cash reserve ratio, the portion of deposits banks are required to park with the apex bank, by 75 basis points to 5.75 percent, indicating that it’s taking a serious view of the inflation scenario. According to analysts, the central bank may raise key interest rates well ahead of the next quarterly policy review, scheduled to take place in April, if the growth is on steady track and inflation keeps rising.

 
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