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Prime ministers

Economic Outlook 2009-10: Industrial Growth to Maintain Double-Digit Pace

Strategic Insights

— 2 min read

The Prime Minister's Economic Advisory Council (EAC) expects industrial output to grow at a double-digit pace through the remainder of 2009-10, with a projected 8.5% growth in the index of industrial production (IIP) for the year. This outlook comes just ahead of the Reserve Bank of India's (RBI) mid-term review of monetary policy on October 27. The EAC's projection is based on a review of the country's macroeconomic scenario and provides projections for various key economic indicators for the year.

Key Takeaways:

  • The EAC projects industrial output to grow at a double-digit pace through the remainder of 2009-10, with a 10.4% average growth rate required for the remaining seven months to achieve the 8.5% target.
  • The services sector is expected to expand at around 8.5%, while a contraction of as much as 2% is seen in the agriculture sector.
  • The EAC forecasts GDP growth at close to 6.5% in 2009-10, with a possibility of it ranging between 5.5% and 6% if the agriculture sector contracts at 6.5%.
  • Inflation is expected to touch 6% by March, higher than RBI's target of 5%.
  • The EAC expects RBI to keep policy rates unchanged and suggests using credit controls to manage liquidity in the financial system.
  • The council projects a modest current account deficit of 2% of GDP and an uptick in external commercial borrowings.
  • Indian companies repatriated $1.84 billion in external commercial borrowings between April and June, compared with $2.35 billion in the same period last year.

Statistics:

  • 10.4%: The average IIP growth rate required for the remaining seven months to achieve the 8.5% target.
  • 8.5%: The projected growth rate in industrial production for 2009-10.
  • 6.5%: The forecasted GDP growth rate for 2009-10.
  • 6.5%: The worst-case scenario for agriculture sector growth, which could lead to a GDP growth rate range of 5.5% to 6%.
  • 6%: The expected inflation rate by March.
  • 2%: The projected current account deficit of GDP.
  • $74: The projected international price of oil for 2009.
  • $1.84 billion: The amount of external commercial borrowings repatriated by Indian companies between April and June.
  • $2.35 billion: The amount of external commercial borrowings repatriated by Indian companies in the same period last year.

Sources:

  • The Indian Express Limited, October 2009
  • Reserve Bank of India, latest report on India's external debt at the end of June.

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