ADB may revise growth and inflation forecast for India

Asian Development Bank (ADB) may revise growth and  inflation forecast for India in its September-end review, according to the chief economist of the multilateral lender's indicated.

''We may raise inflation forecast for India in our next Economic Outlook slated for September 28. It may depend on how Monsoon plays out,'' ADB chief economist Jong-Wha Lee said here. The lender has forecast a GDP growth of 8.2 per cent for 2010 and an average inflation at 5 per cent for the year, both figures are well below other forecasts.

The bank is likely to revise the macro numbers for India upward even with food inflation falling over a percentage point to 10.35 per cent for the week ended 7 August, in the wake of a drop in prices of vegetables, according to data released yesterday. The figure was 11.4 per cent in the earlier week indicating the sharp fluctuation in prices.

The fuel price index increased an annual 12.57 per cent in the week under review, as against 12.66 per cent a week ago.

Headline inflation in July increased at 9.97 per cent, a rate that was slower-than-expected with further easing expected as food prices cool on the back of a good monsoon. 

According to Lee, food inflation in India was largely supply side driven which according to analysts suggests that a monetary response to inflation through interest rate increases may not work.