The Asian Development Bank on Friday said India is poised for a strong recovery this year and urged policymakers to address rising inflation and widening fiscal deficit to insulate itself against future shocks.
Noting that India has quickly regained growth momentum, the bank said the country has emerged from the global financial crisis relatively unscathed, mainly on account of stimulus measures, past reforms, robust domestic consumption and banks’ limited exposure to the global financial system.
“India’s economy is poised for a solid recovery in 2010 as the global financial crisis fades, but policymakers need to address inflation and the widening fiscal deficit to buffer it against the impact of future global shocks,” ADB said.
The conclusions are part of the study ‘Impact and Policy Responses — India’, commissioned by the bank.
India’s GDP grew 7.9 per cent in the 2009 third quarter.
However, the report said positive economic developments were offset by signs of increasing inflation and a worsening trade deficit in the latter part of 2009.
“India was fortunate the crisis was not protracted, which would have tested the government’s ability to continue fiscal stimulus measures for a long period, and potentially compromised its efforts to boost the economy.
Moving forward, India will have to try and improve its fiscal position through more disciplined fiscal management,” the study noted.