The Pioneer 

Indian economy can grow in excess of 8%: ADB

November 29, 2006

The Asian Development Bank today said India's GDP can grow in excess of
8 per cent this fiscal, higher than its earlier projection of 7.8 per cent. "Growth is buoyant and in 2006-07 it could exceed 8 per cent," said ADB's Rajat Nag, Managing Director (designate) and Special Advisor to ADB President.

The average 9 per cent growth during 2007-12 is quite achievable but "10 per cent growth may be a stretch," Nag said. He complimented the government finances as fiscal deficit was declining and tax revenue was growing. Current account deficit of India, is likely to hit 2 per cent of GDP for the whole fiscal year, he said adding that foreign exchange reserves are quite healthy.

Infrastructure needs more attention to sustain the high growth rate as India spends only 4.5 per cent of GDP on the sector, while China spends 12 per cent of GDP.

India requires huge investment, $320 billion according to the Planning Commission, in infrastructure, which can happen through public-private-partnership model only. Nag said institutions like ADB will help finance such projects.

"About 80 per cent of ADB's assistance is for the infrastructure sector, we will be happy to consider giving more funds," he said.

At present, ADB lends a little over 2 billion dollars to India per annum and plans to scale it up to 2.85 billion dollars by 2009. "An enabling environment like financial sector reforms, adequate risk sharing and management framework is required to attract investment to the infrastructure sector," he said.

ADB is trying to develop an Asian bond market and domestic corporate bond markets in countries like India. "Corporate bond market is virtually non-existent in India," he said.

At present, there is no regulatory framework in place in India and there is a need to align various regulators for developing the bond market. An attractive tax regime will also help develop the bond market, he said. ADB, which came out with a Rupee bond issue in 2004, is also providing technical assistance to the government of India for development of a vibrant corporate bond market.

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