Special Correspondent

Improved business confidence drives growth

NEW DELHI: In conformity with indications of economic recovery, the Asian Development Bank (ADB) has scaled up India’s GDP (gross domestic product) growth rate for the current fiscal to six per cent from its earlier projection of five per cent on account of an increase in public spending, a quicker-than-expected return of capital inflows, stronger industrial production and signs of improved business confidence.

In its Asian Development Outlook 2009 Update (ADO Update) released on Tuesday, the Manila-based multilateral bank said that while India’s agricultural output for 2009 is expected to remain stunted and exports weak, “adroit economic management in the form of fiscal stimulus packages and accommodative monetary policy has minimised damage from the global financial crisis and is supporting a relatively strong economic expansion again”.

Alongside, the report has forecast a GDP growth of seven per cent for the next fiscal (2010-11), also an upward revision from the 6.5 per cent projection in March when the ADB launched the flagship annual economic publication ADO 2009.

“The Government’s strong fiscal stimulus, complementing the Reserve Bank of India’s aggressive monetary policy easing, has successfully brought last year’s economic slowdown to an end,” said ADB Chief Economist Jong-Wha Lee.

During the next fiscal, better rainfall, a rebound in exports with the recession ending in industrial economies, and stronger investor confidence would underpin a further improvement in the GDP growth rate, the report said. Pointing to the negative aspects, the report warned that while the public expenditure-led growth strategy has been appropriate in the wake of the global economic weakness, the growing federal and state government deficits would not be sustainable in the long run.