The Indian economy may grow by 9 per cent in the next fiscal on the back of strong industrial growth and rising domestic consumption, global consultant Ernst and Young today said.

“I expect industrial production to be high next year. With normal monsoon, GDP growth could reach 9 per cent in 2010-11,” Ernst & Young Financial Services Partner & National Director Ashvin Parekh said.

He further said India could grow between 7.5 and 8 per cent in the current fiscal as export numbers are expected to rise in the coming months and industrial growth could be around 9-10 per cent.

Impacted by the global financial crisis, the growth rate slipped to 6.7 per cent in the last fiscal from 9 per cent in the three preceding years.

In the first quarter of the current fiscal, the economy expanded by 6.1 per cent, but the momentum in the second quarter (July-September) only with GDP increasing by 7.9 per cent, much more than what was estimated by any analysts or think-tanks.

Rising fiscal deficit and food inflation, Mr. Parekh said, continue to pose big challenge before the economic managers.

“The price rise is due to poor monsoon. However,it has been significantly impacted by the poor supply management and pricing issue,” he added.

Going forward, Mr. Parekh expects food prices to cool down from the present level as the government may look into supply management issues.

For the second week of December, food inflation softened a little to 18.65 per cent compared to 19.95 per cent in the previous week, though prices of certain essential items like potato and pulses continue to rule high.

Besides, the overall wholesale price has increased phenomenally to 4.78 per cent during November compared to 1.34 per cent in the previous month.

The RBI in its monetary policy review in October has revised the inflation forecast to 6.5 per cent by March-end from 5 per cent earlier.

Mr. Parekh also said the high fiscal deficit of 6.8 per cent projected for the current fiscal in not sustainable and divestment is one big instrument to bring it down.

“There is hardly a choice. Disinvestment is the only way to bring fiscal deficit down,” he added.

He suggested that the Government could have a three-year programme to divest its stake in the state-run companies.

“This fiscal, four companies can be divested followed by eight larger PSUs in the next year. The Government could have a two-and-half year roadmap,” Mr. Parekh said.

The government has already divested its stake in two PSUs - Oil India and NHPC - in the current fiscal while stake sale in power firms - REC, NTPC and Satluj Jal Vidyut Nigam - are expected to be completed by March 31, 2010.


Industrial production at two-year highJanuary 12, 2010

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