India: Recent Growth Forecasts

Since my last post a couple of months ago, India’s election results came in, and turned out to be the best possible outcome: a strengthened Congress-led coalition at the national level.  The stock market, which had been surprisingly slow to recover, lagging the other BRICs, has gone up dramatically after the election. Some policy pronouncements since the new government took over have suggested that reform will continue to be slow and piecemeal – for example, Civil Aviation Minister Praful Patel announced that there were no plans to bring in further private sector participation in airport modernization.

On the other hand, the Economic Survey of India, just released on July 2, articulates a very strong pro-reform agenda, especially in its Chapter 2. While news reports typically presented the Economic Survey in this light, it is possible that the reform agenda reflects more of a wish list of the government’s Chief Economic Advisor, and actual policies will be determined by political realities and powerful ministers. Still, the appointment of Kapil Sibal as Human Resource Development minister, and his statements about expanding educational access in India are an encouraging example of a reform mindset.

The upcoming budget will be the next major indication of where policy is heading, especially on the tax reform front (e.g., the Goods and Services Tax) and possibly on expenditure control.

With all this in mind, here is a listing of recent growth forecasts for India, which give an idea of what various analysts and policy makers are expecting down the road in terms of economic performance. Forecasts are tending to be revised upward, and are now more in the 6.5-7 percent range for 2009-10, versus lower predictions earlier. There seems to be greater uncertainty/disagreement about the medium and long term, which is understandable, given the uncertainty about domestic policies and world economic conditions.

January 29, 2009: Montek Singh Ahluwalia (Deputy Chairman, Planning Commission)

“India should be able to maintain economic growth of around 6.5-7% in the 2009-10 fiscal year but needs to ramp up infrastructure spending to boost growth, a senior policy adviser said on Wednesday.”

March-April 2009: Various forecasts, summarized in Economic Survey of India

“A number of forecasts and projections have been made on the prospects of the Indian economy in 2009-10. These range from a low of 4.8 per cent (ICRIER, March 2009) to a high of 6.5 to 7.5 per cent (ICRA, April 2009). The RBI’s April 2009 projection stands at 6 per cent and that of PM’s Economic Advisory Council at 7-7.5 per cent. Among the international agencies, the March 2009 ADB forecast for 2009-10 is 6.5 per cent, IMF is 5.6 per cent and World Bank’s forecast for the calendar year 2009 is 4 per cent.”

May 14, 2009: Fitch ratings agency

“Rating agency Fitch today said it expects India’s growth to slow to about 5 per cent in the current fiscal due to recession in advanced economies and the reduction in capital flows.”

May 15, 2009: RBI Professional Forecasters’ Survey

“A Reserve Bank-conducted survey today lowered India’s growth rate projection to 7.5 per cent per annum for the next 10 years, down from 8.8 per cent estimated earlier.”

May 29, 2009: Various banks’ forecasts (Reuters story)

“Three banks on Friday raised their growth forecast for 2009/10 after better than expected economic data for the March quarter sparked hopes of an economic recovery.

The Indian economy grew 5.8 percent from a year earlier in January-March, matching the upwardly revised rate in the previous quarter, data showed on Friday. That was still the lowest in four years, but above analysts’ forecast of a 5.2 percent annual expansion.


The central bank expects 2009/10 growth to be at about 6 percent.

Morgan Stanley said it has revised its 2009/10 growth forecast to 6.2 percent from 5.8 percent earlier and kept its 2010/11 forecast unchanged at 5.8 percent.

Nomura also raised its growth forecast to 6.3 percent in FY10 from 5.3 percent earlier.


Kotak Mahindra Bank raised its GDP forecast to 6 percent from 5.5 percent earlier.

Following are the latest analysts’ forecasts for 2009/10 GDP growth:

·    Nomura 6.3 pct

·    Kotak Mahindra Bank 6.0 pct

·    Morgan Stanley 6.2 pct

·    Barclays 7.0 pct

·    HSBC 6.2 pct

·    Goldman Sachs 5.8 pct

·    [HDFC 6.5 pct, June 15 story on CMIE forecast]”

June 1, 2009: Macquarie Research

“Macquarie Research has raised its growth forecast

for 2009/10 to 7 per cent and for 20010/11 to 7.5 per cent after the economy grew at a better-than-expected pace in the quarter-ended March, it said in a recent note.”

June 15, 2009: CMIE

“Despite falling exports, the Indian economy would grow by 6.6 per cent in the current fiscal on the back of strong domestic market and resilience, economic think-tank Centre for Monitoring Indian Economy (CMIE) said. However, the economy is likely to bounce back to nine per cent growth path by 2010-11 when the impact of poor exports demand is overcome.”

July 2, 2009: Economic Survey of India, paragraph 2.43

“If the US economy bottoms out by September 2009, there could be good possibility for the Indian economy repeating its 2008-09 performance, i.e. around 7.0 +/- 0.5 per cent in the fiscal 2009-10 (assuming a normal monsoon).”

July 2, 2009: Economic Survey of India, paragraph 2.45

“In the medium-term, with the global economy recovering from the current slowdown and given the growth dynamics of the economy in the recent years, India should be back on the new trend growth path of 8.5 to 9 per cent per annum (Figure 2.9), provided the critical policy and institutional bottlenecks are removed.”