Macroeconomic Forecast India

March 2004 | Macroeconomic Forecasts

India's economy will slow in the fiscal year ending March 31 2005 (2004/05), when we expect real GDP growth of 6.5%. Growth in the agriculture sector, which hit a six-year high of 9.1% in 2003/04, according to advance estimates, will return to trend. The fast-growing service sector, which accounts for more than half of total GDP, will drive the economy. Low interest rates and recently announced tax cuts are fuelling a boom in household spending. In February, car sales rose 73% y-o-y to 64,821 units - suggesting that consumer demand remains as strong as ever. The likelihood of an early rise in interest rates receded during the week ending March 6 when wholesale-price inflation fell to 4.9%. Inflation had been running at nearly 6.0%.

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