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India growth outlook clouded by oil price, inflation: Report
Published on 20 Mar. 2011 12:57 AM IST
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Domestic and global factors are conspiring to darken India’s once-shining growth outlook, with inflation and sluggish investment likely to keep economic expansion well below the government’s target of 9 percent in the coming year.
Eight rate increases since last March, with more on the way, have failed to kill off inflation that topped expectations at 8.3 percent in February. They have, however, begun to crimp demand, stated Zee news.
That threatens to worsen an investment climate already soured by bureaucratic delays and a government that has been crippled by a string of corruption scandals.
Sluggish investment, in turn, is slowing the addition of much-needed infrastructure and industrial capacity in an economy plagued by supply-side bottlenecks. Industrial output rose just 3.7 percent in January, its strongest in three months.
“We really need infrastructure growth but you cannot create infrastructure at such high rates, so it’s a double whammy situation,” said K.G. Mantri, senior vice president at Mumbai-based Man Industries, which makes steel pipes.
Investment in India grew just 6 percent in the December quarter, far behind the 18 percent growth in the six months through September, according to Citigroup. The Reserve Bank of India warned on Thursday of fragile investment conditions.
Global portfolio investors, meanwhile, have fled India this year. The benchmark Bombay share index has tumbled 12 percent, making it the worst performing major stock market in Asia along with Japan, where the unfolding nuclear crisis threatens to add to a broader global environment of risk aversion.
With global oil prices above USD100 and threatening to remain elevated, fuel has replaced food as India’s key inflation worry.

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