The Asian Development Bank today predicted that the Indian economy would grow at of 8.2 per cent in 2010 and 8.7 per cent in 2011, but rising inflation would remain a concern for policymakers.
Noting that India's rebound from the global crisis is set to accelerate this year, the bank said the stimulus measures taken by the government would be gradually rolled back as the economy sets itself on the high growth path.
"India's rebound from the global crisis is set to accelerate in 2010, with estimated growth of 8.2 per cent, although rising price pressures present a challenge to policymakers as they steer the economy's recovery," ADB said in its semi-annual report titled Asian Development Outlook 2010.
An improving global environment, rising private consumption and investment are likely to underpin growth over the next two years, said the multilateral lending agency. However, a surge in food prices following a poor monsoon and floods in some parts of the country as well as chances of fuel prices increasing in 2010 and 2011 will continue to challenge policy makers, it said.
The ADB predicted that annual inflation would be 5 per cent in 2010 and rise to 5.5 per cent in 2011. "In addition, a weak agriculture sector and infrastructure bottlenecks remain obstacles to longer-term growth," it said.
The Manila-based ADB, which provides financial assistance for projects in the Asia Pacific region, said more government spending on infrastructure was needed. This might require a tightening of subsidies as part of fiscal consolidation and more public-private investment partnerships.