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GROWTH STILL HAS A CHANCE

The Economic Times, June 16, 2008

The sudden spurt in the inflation rate these past few weeks, mainly on account of global oil prices, is causing analysts to review their GDP forecast for India.

Until a few months ago the expectation was that, even after a marginal slowdown, India would still manage to clock a GDP growth of 8% and that the inflation rate would settle down to below 7% by the year end.

Now there is some apprehension among analysts that the average inflation rate for the year may stay above 8% and growth may slip to below 8%. The official position of the government and the RBI, however, remains unchanged. Growth forecast is now being reviewed as no one had anticipated that the oil prices would shoot up the way they did last fortnight.

The latest inflation rate measured by the Wholesale Price Index has touched a seven-year high of 8.75% and this is likely to inch closer to 10% in the coming weeks as the recent domestic oil price hike by the government gets factored into the Wholesale Price Index. The general upward movement in the bank lending rates, following the repo rate cut, is also adding to the incipient pessimism about growth in 2008-09.

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