India's economy to grow at 6.5 per cent in 2009-10

In its mid-term assessment of the country's economic outlook, the Economic Advisory Council to the prime minister has projected a 6.5 per cent growth in the current fiscal (2009-10)· It also expects the Indian economy to have ended fiscal 2008-09 with a 6.7 per cent GDP growth - amongst the highest growth rates in the world - despite the effects of the financial market turbulence.

The panel has projected a 6.5 per cent GDP growth rate in the current fiscal on the basis of an 8.2 per cent growth in industry (including construction) against a 3.9 per cent growth in 2008-09 and an 8.2 per cent growth in the service sector, down from 9.7 per cent in the previous financial year.

The high growth rate has been made possible by well-calibrated adjustments in the monetary and fiscal policies, the panel said, adding that the current year growth is likely to reach 6.75 per cent, and in any case is unlikely to fall below 6.25 per cent.

The global recession, higher household savings and demand contraction in developed economies have adversely affected India's exports although there are encouraging signs of a revival of capital flows.

An extension or a second negative shock to the global financial system and rising global inflation could, however, jeopardise growth in Indian economy, the panel said.

While the investment rate in the economy remained unchanged in 2008-09, the PMO panel has projected investment rate to zoom to 36.5 per cent in 2009-10. Investment could pick up with improvement in domestic conditions, it added.