ADB ups India's growth forecast to 6 per cent

The Asian Development Bank (ADB) has raised its projection of India's economic growth in the current fiscal to 6.0 per cent from the earlier 5.0 per cent in the backdrop of rising business confidence and the government's pro-growth policies.

ADB expects the Indian economy to grow at an even faster rate of 7.0 per cent in the next fiscal, ie, 2010-11.

"Emerging signs of a recovery in private business confidence and a continued large fiscal stimulus announced in the July 2009 budget helped bolster India's projected economic expansion to 6 per cent this year, upgraded from 5 per cent in March,'' the multilateral lender said in the update on its Asian Development Outlook 2009.

ADB, however, expects the inflation, which has turned positive, to continue its upward spiral and reach 4-5 per cent by March 2010.

"Inflationary pressures are likely to persist, driven by high food prices and expansionary monetary and fiscal policies,'' ADB said in a release.

Rising food inflation, ADB said, would create a dilemma for the monetary authority and may jeopardise its easy money policy, which in turn would affect economic growth. However, it expects the delayed rains to ensure a reasonable winter crop harvest and ease pressure on food prices.