China Watch Blog reports that India is expected to grow at 6.1 per cent in calendar year (CY) 2012, similar to the pace recorded in the fourth quarter of 2011.
An Economic Times report quoted the Ernst & Young’s quarterly Rapid Growth Markets Forecast (RGMF) as saying that growth should be picking up in H2, 2012, provided the global economy does not experience a further shock.
Over the medium term, we expect a strong recovery in investment, which will help lift overall GDP growth over 9 per cent by 2014, it said.
“India’s domestic demand-driven growth model is acting as a catalyst for attracting foreign investments into the country.
Although the ongoing global uncertainty may have prompted global investors to become more cautious, India’s inherent advantages and proven resilience to counter-act macroeconomic challenges generally outweighs these concerns,” Ernst & Young India Partner & India Markets Leader Farokh Balsara said.
According to the forecast, in India, the biggest development will be in the lower middle class with the number of households with disposable income of USD 5,000 to USD 15,000 rising to around 150 million in 2020 from just under 100 million now. In particular, this represents opportunities for companies in the developed economy such as US and Europe for investments.
While the purchasing managers Index (PMI) and car sales data in January and February of 2012 have hinted at a stronger growth dynamic for India, the country will need to address rising inflation, which is still high.
As per the forecast, the country’s central bank will not be in a position to cut interest rates until core inflation (excluding food) is on a clear downtrend and that may still be some months off, particularly as the economy has recently gained considerable momentum.
The wholesale price inflation should trend down through 2012 to about 5 per cent in Q4, reflecting the lagged impact of the weaker economy and lower food prices, the forecast said.