ADB forecasts India GDP to expand 8.2 percent in 2010

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Rising private consumption and investment will support India's economic growth in the next two years, with the country's GDP forecast to grow by 8.2 percent in 2010 and 8.7 percent in 2011, the Asian Development Bank (ADB) said in its latest report.

According to the Asian Development Outlook 2010 (ADO 2010), ADB 's flagship annual economic publication released Tuesday, the normalization of financial market conditions will support a rebound in private investment in 2010. Urban consumption is set to remain strong, with fears of job cuts dissipating amidst substantial new recruitment, and salaries on an upward trend.

Such growth, however, will only be sustained if the India's economic planners will invest in infrastructure and agriculture.

"The outlook is for a return of high growth, although this will require continued apt handling of macroeconomic policies, and to sustain long-term growth it will be essential to address infrastructure bottlenecks and to reform agriculture," ADB Chief Economist Jong-Wha Lee said in a statement.

To strengthen agricultural output, which fell an estimated 0.2 percent in 2009, the ADB proposed that the Indian government should raise farmgate prices, and address distribution, trade, research, and subsidy constraints. The government should also invest in infrastructure and this may require a tightening of subsidies as part of fiscal consolidation, as well as more public- private investment partnerships.

Indian policy makers also need to be more careful about the timing of fiscal and monetary adjustments to avoid stoking inflation or choking off growth.

"Too slow a removal of the fiscal and monetary stimulus support may lead to a quick uptake of inflation, while too rapid a removal may derail the recovery," Lee said.

Fiscal and monetary stimulus measures, an improving global environment, a return of investor risk appetite, and large capital inflows helped the Indian economy to grow at 7.2 percent. This, despite the global meltdown that battered most emerging economies.

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