Macroeconomic Forecast India

May 2005 | Macroeconomic Forecasts

Higher interest rates will weigh down on industry during the year ending March 31 2006 (2005/06) but real GDP growth will strengthen to 7.3% from last year's estimated expansion of 6.9%, according to BMI forecasts. During 2004/05, Indian factories had their busiest year since 1995/96 as industrial output expanded by 8.1%. Output of consumer goods expanded a double-digit 11.3%. But industry is set to slow in 2005/06, BMI believes, as higher borrowing costs depress consumer demand for goods and services. At its April 28 policy review, the Reserve Bank of India, raised its short-term reverse repo rate to 5.00% in a bid to rein in inflation which is now running at almost 6%. Agriculture and services will, however, post stronger growth in 2005/06

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