OECD upgrades India growth forecast to 5.9 pc for 2009

Paris/New Delhi, June 24 (PTI) The OECD, a club of rich
nations, Wednesday raised India's growth forecast to 5.9 per
cent for the current year and urged the new government to
restore fiscal discipline and move ahead with disinvestment.

"With the gradual recovery of the global economy and
easier financial conditions, growth is projected to gradually
regain momentum," said Organisation for Economic Cooperation
and Development (OECD), a group of 30 developed nations.

The OECD, in March, projected 4.3 per cent economic
expansion for India in 2009.

"In India, growth is predicted to slow to 5.9 per cent in
2009 before accelerating to 7.2 per cent in 2010 (March
forecast was 4.3 per cent and 5.8 per cent)," the OECD said in
its latest Economic Outlook report.

Pointing out that combined fiscal deficit of the Centre
and state governments would go up to 11 per cent of the GDP
during 2009, the report said, adding, "The new government
will face the need to restore fiscal discipline, speed up
structural reform and increase sales of public sector assets.

"Any further easing in policy should be achieved through
lower interest rates, rather than discretionary fiscal
expansion."

The report further said the extent of the deterioration
in the fiscal position prior to the slowdown has reduced the
scope for "discretionary fiscal policy action".

The fiscal deficit of the central government, accordingto
the interim budget data, went up to over 6 per cent during
2008-09 against the original estimate of 2.5 per cent. Taking
into account expenses on off-budget items like oil and
fertiliser bonds, the total fiscal deficit on the centre has
been estimated at around 8 per cent.

The OECD's forecast is much more optimistic than World
Bank, which on Monday projected the Indian economy to expand
just 5.1 per cent.

Prime Minister Manmohan Singh had recently said that he
expects the country's economy to grow by seven per cent in
the current fiscal year (2009-10). Meanwhile, the Reserve Bank
of India estimates the GDP to expand at a rate of six per cent
this fiscal year.

The OECD noted that the extent of the deterioration in
the fiscal position prior to the slowdown has reduced the
scope for "discretionary fiscal policy action".

"Indeed, the new government will face the need to restore
fiscal discipline, speed up structural reform and increase
sales of public sector assets. Any further easing in policy
should be achieved through lower interest rates, rather than
discretionary fiscal expansion," the report said.

Moreover, the OECD said that growing use of protectionist
measures is a cause for concern.

According to the grouping, in 2009, falling exports are
projected to result in some slowdown in domestic demand. "With
the gradual recovery of the global economy and easier
financial conditions, growth is projected to gradually regain
momentum," the report noted.

Even as the financial turmoil turned for the worse
globally late last year, India managed to record a growth rate
of 6.7 per cent for the financial year ended March 31, 2009.

The grouping of rich nations has also projected the
Chinese economy to expand 7.7 per cent in 2009 as against the
March forecast of 6.3 per cent. In 2010, the China GDP is
anticipated to grow 9.3 per cent.

The OECD nations include the US, the UK, Japan, Euro area
(grouping of 16 nations which share the common currency euro),
Germany and France. PTI RAM