World Bank predicts slowdown in India's GDP growth

The World Bank has predicted India’s gross domestic product (GDP) to further slow down from 8.7 percent in fiscal year 2007 to 7.0 percent for fiscal year 2008. The world’s apex bank has probed ‘India’s tight monetary policy’, which government has adopted in recent months to curb inflation, as it would reduce the domestic demand and the demand of industrial goods.

Releasing its report on its official website entitled ‘Global Development Finance’ on June 10, the Bank stated, “GDP growth in India eased to a still strong 8.7 percent in 2007, from 9.7 percent in 2006, and is projected to dip further to 7 percent in 2008, as monetary tightening in 2007 led to a softening in domestic demand.”

However, it also adds, “Though slowing, consumption has maintained a strong tone resulting from healthy wage growth and large remittance inflows, with the latter primarily fueled by increased demand for migrant work in the oil-exporting countries of the Middle East.”

Describing the last year’s higher economic growth, the Bank said that India’s higher economic growth in last fiscal was due to continuous huge capital inflows, high capacity utilisation, and reinvestment of corporate profits, while the more clutching mentoring policy griped the rising inflation in 2007 but contributed to an appreciation of the rupee against the global currency dollar and this led to heavy loss of India’s exporters.

The rising import prices and fluctuating massive domestic demand jointly forced to worsen the nation’s current account deficit and since the beginning of the year 2008, the inflationary pressures began to build.

Indicating to India’s industrial production, the report said, “India has shown 3% growth in the industrial sector in month of April that is indicating the declination of economic growth. Even though, the huge inflow and strong growth in wage rates despite of industrial slowdown has checked the fallen rate of consumption.

The condition of global GDP growth is also not pleasing and the World Bank has indicated to slow down the Global GDP by 1 percent from last fiscal 3.7% to 2.7 % for the fiscal 2008.