India likely to grow by 6.1-6.5 pc in FY'10: CII

New Delhi, May 3 (PTI) Expecting some recovery from the
economic slowdown, industry chamber CII Sunday projected that
the Indian economy to expand by 6.1-6.5 per cent in the
current fiscal as demand for consumer goods and services is
likely to get a boost due to cuts in taxes and interest rates.

"In 2009-10, we expect some recovery to be driven by the
decline in interest rates...reduction in in excise duty and
service tax should also drive demand for consumer goods and
services. We are therefore expecting GDP growth of 6.1-6.5 per
cent in 2009-10," the Confederation of Indian Industry (CII)
said in a report on the 'State of the Economy.'

The chamber's projection is based on expected 2.8-3 per
cent growth in agriculture, 5-5.5 per cent in industry
and 7.5-8 per cent in services.

Under the impact of global financial meltdown, India's
economic growth rate slowed down drastically to 5.3 per cent
in the third quarter of last fiscal, from 8.9 per cent in the
corresponding period of 2007-08.

For the first nine months of 2008-09, the growth rate
stood at 6.9 per cent against nine per cent a year ago, making
it difficult to achieve the projections of 7.1 per cent for
the entire fiscal as estimated by advance estimates of the
Central Statistical Organisation.

To enable India witness more decisive recovery, the
chamber demanded further monetary easing by cuts in short term
lending and borrowing (repo and reverse repo) rates by RBI by
at least 50 basis points, implementation of large infra
projects and reviving of confidence by ensuring a
business-friendly environment.

At a time when the global economy and global trade are
projected to contract, it will be extremely important to
maintain counter-cyclical fiscal and monetary policy, it
added.

The drivers of economic growth have to come from domestic
sources. The government therefore needs to maintain higher
spending, especially in the creation of public assets, the
report said.

Monetary policy, in turn, needs to be supportive. "Any
pressure on interest rates to rise at this juncture will crowd
out private spending," CII Director General Chandrajit
Banerjee said.

The government-estimated growth for 2008-09 is 7.1 per
cent. However, as per the RBI estimates, GDP growth would be
around 6 per cent in 2009-10.

In view of the good performance of the agricultural
sector, the chamber said that rural demand would remain
strong.

"The fact that rural demand remains unaffected by global
developments is a source of strength for the Indian economy,"
Banerjee said. PTI RR
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