India needs sustainable stimulus, growth forecast 5 percent: ADB (Lead)

March 31st, 2009 - 12:35 pm ICT by IANS  

Manila, March 31 (Xinhua) India’s economic growth will slow to 5 percent in 2009, and authorities should adopt more sustainable stimulus plans to ensure long-term inclusive growth, the Asian Development Bank (ADB) said in its annual economic forecast report released here Tuesday.
The Manila-based regional lender said that the fiscal stimulus measures the Indian government announced between December 2008 and February 2009 should allow India’s growth to rise to 6.5 percent in 2010.

But it also warned the Indian authorities of the “serious risks and challenges” brought by the country’s fiscal position.

“It is imperative that the central government brings down its deficit in the medium term to a manageable level in order to ensure long-term debt sustainability,” ADB Acting Chief Economist Jong-Wha Lee said in a statement.

ADB said the Indian government’s budget deficit is estimated at 6 percent of GDP in the 2008 fiscal year, up from a targeted 2.5 percent. But off-budget items and deficits of state governments bring the estimated general government deficit to 10 percent of GDP.

“Expansionary fiscal policies could impair the confidence of investors unless clear signals are given that the present large deficits are truly temporary,” he said.

ADB urged the Indian government to review tax policy, the quality of public spending and the effectiveness of public programmes to ensure that it has room for the infrastructure and social sector spending that is necessary for achieving rapid, longer-term inclusive growth.

India’s economy registered a 5.3 percent growth from October to December last year, the lowest quarterly growth in five years.

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