Macroeconomic Forecast India

February 2007 | Macroeconomic Forecasts

After a strong first half, we expect growth to come in at 8.7% in FY2006/07, but India's economy is currently running above potential as a result of three years of loose monetary conditions. Rising inflation and a widening current account deficit are both indicative of excess demand. Now, with the central bank aggressively tightening, we expect credit growth to ease and domestic demand to cool. The external environment is also set to be less accommodating going forward, with the US, eurozone and Japanese economies all slowing. We therefore expect growth to fall to 7.3% in FY07/08, slightly below the 7.5%

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