Asia on the rebound: ADB ups India growth forecast to 6 pc

The bank raised its 2009 growth forecast for developing Asian countries as a group to 3.9 per cent,from 3.4 per cent.

“Developing Asia is proving to be more resilient to the global downturn than was initially thought,” the bank said in a statement accompanying its semiyearly assessment.

A common factor among countries doing better than expected is that they have been able to offset weak exports by stimulating domestic demand more than anyone expected.

ADB points out about India that while the agricultural output for 2009 is expected to remain stunted and exports weak,the government’s move to extend fiscal stimulus packages has countered the impact of the global financial crisis on India . “The government’s strong fiscal stimulus,complementing the Reserve Bank of India’s aggressive monetary policy easing,has successfully brought last year’s economic slowdown to an end,” said ADB chief economist Jong-Wha Lee.

According to ADB estimates,even though company net profits have shown growth and external commercial borrowing were up by 19 per cent in June this year,weak agricultural output in the second and third quarters is likely to weigh on growth. A rebound is expected in the final quarter,it says.

The report says that India may face financial crowding out of private investment in 2010 as a result of the government’s stimulus programme. Another threat is that domestic food price inflation may create a dilemma for monetary management in 2009 as the RBI seeks to keep inflation expectations in check,but not choke off a recovery. Further,bad weather conditions are likely to put pressure on food prices in the coming months. With NYT