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vipinlara's review
Investment Sector: Emerging Markets Submitted by Vipinlara 
7 months ago Add Tag |
Crisil has revised its GDP growth forecast to 8.1 per cent for 2008-09 from the earlier forecast of 8.5 per cent in view of the worsening inflation, interest rate and global growth outlook.
Some moderation notwithstanding, I have no doubt that the overall growth scenario is expected to remain strong with investment as the main driver. Domestic private consumption demand will also provide some support to the economy against slowing external demand. Sectoral forecasts for industry and services have also been adjusted downwards to 8 per cent and 9.8 per cent respectively. Assuming a normal monsoon this year, Crisil expects agriculture will grow at 3 per cent.
The current pressure in inflation is from commercial commodities and oil -- a worldwide phenomenon related to the supply crunch which is not expected to ease soon. As a consequence, despite growth deceleration, experts are expecting inflation at an average of 5.5 per cent in 2008-09 under a normal monsoon scenario. While inflation is expected to remain high in the next few months due to a continuation of global pressures and an unfavourable base effect, experts expect it to soften towards the end of the year. If monsoons are sub-normal and agricultural production falters, inflation scenario could worsen.
The Reserve Bank of India has consistently maintained that containing inflation within its target zone is its primary objective. Given high inflationary expectations, the central bank has already raised CRR by 50 basis points ahead of the policy announcement. This will exert upward pressure on the interest rates.
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