ADB sees Indian economy growing at 7 percent

New Delhi, April 11 (IANS) India's economic growth is likely to rise marginally to 7 percent this fiscal from 6.9 logged in 2011-12 as global conditions stabilise, the Asian Development Bank (ADB) said Wednesday.

The country's gross domestic product (GDP) is projected to grow at 7.5 percent in 2013-14, ADB said in its annual flagship report, Asian Development Outlook 2012.

The Manila-based lender said India's economic growth was likely to improve marginally due to stabilising global economic condition but any significant acceleration in growth would depend on the push to economic reforms.

"India should see a moderate uptick in growth during 2012-13 and 2013-14 as global conditions stabilise, but a return to the very strong performance of recent years hinges on moving the reform agenda forward, especially addressing issues that are constraining investment," it said.

The economy grew by 8.4 percent in 2010-11.

Economic growth slumped last year mainly because of uncertain global situation, high cost of credit that affected investments and the government's inability to push forward reforms.

"An expected easing in monetary policy after a long period of persistent inflation and rate hikes might help stimulate investment over the coming year, but its impact is likely to be limited until obstacles like land purchase and environmental regulations, which are currently deterring both domestic and foreign investors, are addressed," said Changyong Rhee, ADB's chief economist.

The slide in 2011-12 growth reflected falling exports, weaker consumer spending and a slump in investment.

Industrial growth dropped to a decade low of 3.9 percent, although services remained robust, contributing nearly 80 percent of overall GDP growth for the year.

Inflation eased late in the year, after 13 consecutive policy rate hikes by the Reserve Bank of India, but a sharp first-half pickup in exports was not sustained in the second, as global demand fell.

In the report titled Asian Development Outlook 2012, the ADB said inflation was likely to moderate further on expectation of a normal monsoon and more stable global commodity prices, with the average rate expected to be 7 percent in 2012-13 and 6.5 percent the following year.

However the longer-term outlook for consumer prices will also depend on structural reforms to improve production and distribution of food as India's consumption patterns and incomes change.

Moderation in the growth of non-oil imports in 2012-13 and improved economic prospects in the advanced countries in 2013-14 are expected to help the current account deficit to improve to 3.3 percent in the current financial year and further to 3.0 percent next year, the report said.