“There are several perceptible risks going forward. The first is the extent of slowdown that may manifest in the economies of developed world,” the EAC said in its review of economy in 2007-08.

However, the EAC in its report, released by Chairman C Rangarajan said “the council is of the opinion that slowdown will be a modest one which would not significantly impact India’s next year’s growth prospects by much.” “There could however be continued inflationary pressure. On balance, with usual caveat of a normal monsoon, the Indian economy is likely to grow by about 8.5 per cent in 2008-09,” Mr Rangarajan told reporters. The EAC also lowered the likely growth rate of economy during 2007-08 to 8.9 per cent compared to 9 per cent it projected in July last year. The lower growth projection is due to decline in the growth rare in the key manufacturing sector.  

The lower projection of 8.5 per cent growth during 2008-09 is in sharp contrast to Finance Minister P Chidambaram’s robust optimism that economy would grow by more than 9 per cent in the next fiscal.

Several reasons
Mr Rangarajan explained there are several reasons why growth next year is expected to be a bit lower than the current fiscal. These include continuation of slower growth in the demand for consumer goods and ‘slightly’ slower growth in the trade, hotels, transport and communication sectors.

The farm sector, which is projected to grow by 3.6 per cent in the current fiscal, is expected to grow by 2.5 per cent in 2008-09. 

MOODY’S PEGS IT AT 8 PC
India’s economic growth will slow down to eight per cent in 2008, as higher interest rates would dampen credit demand and take steam out of consumer spending, Moody’s said on Thursday.

Although fundamentals remain strong and its prospects upbeat after an impressive pace in 2007, growth in India’s domestically-driven economy would moderate in 2008 as domestic demand eases and exports cool, according to Moody’s Economy.com, a subsidiary of global credit rating agency.

“Real GDP growth is expected to moderate to 8 per cent in 2008 from an estimated 8.8 per cent in 2007 as tighter monetary conditions dampen demand for credit and take some steam out of consumer spending,” Moody’s Economy.com Asia Pacific Economics Director Ruth Stroppiana said in an outlook report on India.

India’s development hurdles include “poor infrastructure and archaic labour laws”, which deters development o