2008.12.3005:15:00UTC+00Indian Economy Likely To Grow 7.1% In FY09 - Assocham

The Indian economy is likely to grow 7.1% in fiscal year 2008/09, lower than the 9% growth reported for the last fiscal, due to the impact of the global financial turmoil, according to the Chief Executive Officers' survey conducted by Assocham, the industry body, reported the media.

The survey said that the growth slowed due to the global downturn and higher borrowing costs that trimmed demand. The survey was conducted on 250 Chief Executive Officers. Growth is likely to decline further to 6.5% in the following year as the global economic scenario worsens.

The survey suggested strong fiscal stimulus to boost growth even in spite of widening fiscal deficit. The survey had estimated growth of 7.6% in July 2008.

The government had earlier announced a Rs.20,000 crore-stimulus package along with a reduction in the factory gate duty rates by 4% points on a wide range of manufactured goods and reduced the fuel prices to revive the plunging growth. The apex bank also cut its repo rate by 250 basis points to 6.5% since October to increase growth. The CEOs suggested the central bank should reduce the reverse repo rate, the rate at which it borrows funds from banks, to encourage banks to lend more money to corporates facing liquidity crunch. The survey also predicted growth of 3.9% in the agricultural sector, 6% in the industrial sector and by 8.7% in the service sector.

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