Experts Say India Economy to Slow in 2011

January 6th, 2011
in Background

News Center:  The Indian economy has been surging at an 8.9% pace for the past three quarters, but top economists whom CNBC-TV18 interviewed believe that the economy will slow in 2011. High inflation, fiscal deficit and current account deficits will constrain the economy. CNBC-TV18’s Vidhi Godiawala reports with views from the best and the brightest.

Follow up:

Finance minister Pranab Mukherjee has repeatedly asserted that India's 8.9% GDP record in 2010 will improve to 9% in 2011.  But veteran economists believe, India's rising inflation and a widening current account deficit may lower the pace to 8% at best.

YV Reddy, Former Governor, RBI said, “India is likely to grow at the 8%+, provided the two challenges are met satisfactorily. one is external account, current account deficit is pretty high compared to many other fast growing EM economies and given the volatile situation in the financial markets, our own situation that will be one challenge. And the second is inflation, domestic inflation, partly complicated by supply inelasticity and rigidity. If these two are brought under reasonable satisfactory management, external account and inflation, then I think India should comfortably be in the growth trajectory of 8%+ both for 2010 and 2011.” 


Inflation is the bigger threat according to Stephen Roach, Non-executive Chairman of Morgan Stanley Asia. Said Roach, “I think there is no mistaking the inflationary pressures in India and China. It is incumbent on the central banks in both countries to move aggressively to deal with it.” He added, “Clearly RBI is moving very sluggishly in light of the extent of the problem. Likely RBI will have to pick up speed. In which case economic growth will slow and India may not stay the course of an 8.9% growth if there is meaningful tightening.”  Read more at News Center.....

From Sanjeev Kulkarni

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