G Seetharaman
 
Jim O’ Neill expects India’s GDP growth to slow down to 7.8% in the current fiscal

Mumbai: Giving credence to the Reserve Bank of India’s expectations, Jim O’Neill, managing director and head of global economic research of Goldman Sachs, said inflation in India would come down in the coming months.

Addressing the media while releasing a report on the global economy, he added, “If the commodity prices do not rise further, inflation will fall.”

“The inflation rate will be around 6.5% for the next six months and then fall to around 5%,” said Tushar Poddar, chief India economist of the firm, echoing O’Neill’s view.

Higher prices of crude oil and other commodities pushed up India’s inflation rate to 7.41% in the last week of March from a year earlier. Price gains eased to 7.33% in the week ended April 12.

The report expects India’s GDP growth rate to slow down to 7.8% in the current fiscal, only to rise to 8.2% next year. It also estimates domestic demand in India and China to grow by 9.9% and 8.3%, respectively, this year, as against -0.1% in the US.

The report adds that domestic demand in India contributes 5% to world growth.

The numbers provided by the report need to be taken with a handful of salt, for the price of crude was assumed to be around $95, whereas it is trading in the vicinity of $120 now.

O’Neill, while discussing the downturn in the American economy, stated that the world is coping well with the issue because BRIC (Brazil, Russia, India and China) economies contributed 15% of the world’s GDP (gross domestic product), half as much as the US.

He added that the US had seen the worst of the housing crisis and this was the time for the country to overcome its external deficit. On interest rates in the US, he said they would not determine the money flowing into emerging economies, which in turn is determined by the growth potential of those countries.

On the future of the US dollar, O’Neill, credited with coining the term ‘BRICs’, said it would recover in 2009.

Throwing light on the BRIC report predictions, he said, “If the productivity of the Indian working population is realised in the next thirty years, it could equal that of China and the US put together.”

Source : DNAIndia