NCAER projects India's economic growth at 8.9 percent in FY09

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"On the lower side, the economy is projected to grow at 8.5 percent as the short-term prospects are less attractive than a year earlier due to rising inflation and fears of slowing down. However, as investment scenario is healthy, in the more comprehensive case, GDP (gross domestic product) growth is projected at 8.9 percent," it said.

NCAER's projection is higher than that of India's central bank, the Reserve Bank of India (RBI), which said that the nation's economy would grow by 8-8.5 percent in the year ending March 31, 2009.

The economic think-tank also said India's inflation, currently over 5.5 percent, would come down to settle in a range of 4.9-5.2 percent for the current fiscal year compared to 4.4 percent achieved a year earlier. At the same time, fiscal deficit is projected to be in the range of 2.6-3 percent of GDP even under the higher growth scenario, it added, due to higher government spending. The Indian government aims to cut the deficit to 2.5 percent this year from 3.1 percent in last year.

However, India's growth is dependent on how it overcomes the economic shocks, NCAER said in its latest quarterly review of the Indian economy.

According to NCAER, the cyclical downturn in advanced economies and high commodity prices in international markets due to both short-term supply shortages as well as high growth in economic activity in the emerging economies could act as shocks.

"The slowdown in growth on account of adverse global factors may be offset by the expansionary fiscal policy," NCAER suggested in its report.

While agriculture output is expected to grow by 2.5 percent (as against 2.6 percent last year), industrial output is expected to grow by 8.9-9.4 percent in the current fiscal year.

The services sector is likely to grow by 10.2-10.5 percent during the year ending March 31, 2009, the report said.

Both exports and imports would moderate during the current fiscal year, it said. While exports growth is expected to decline to 16.6-17.9 percent during 2008-09 from 23 percent last year, imports growth is seen at 18.2-19.5 percent compared with 30.2 percent of last year, the report said.