India to grow at 8 p.c next fiscal: Goldman Sachs

NEW DELHI, INDIA: Investment banker Goldman Sachs Friday said India would post a growth of over 8 percent in 2010-11 and 8.7 percent the following fiscal, thanks to strong domestic demand and greater global liquidity.

"After two years of below-trend growth, in part due to the global financial crisis, India's economy, in our view, is set to accelerate again," the firm said in a statement, and attributed it to "benign policy and abundant domestic and global liquidity".

"We forecast real GDP to grow by 8.2 percent in FY11 and 8.7 percent in FY12 on the back of an acceleration in investment demand, particularly infrastructure," said Tushar Poddar, an economist with Goldman Sachs.

"We are raising our FY10 GDP growth forecast to 6.6 percent from 5.8 percent due to a large positive surprise in second quarter GDP," Poddar added.

However, Goldman Sachs noted, rising food prices remained a challenge.

"We forecast WPI (wholesale price index) inflation hastening to 6.5 percent by March 2010 from 1.5 percent in October due to commodity prices, especially food," Poddar said.

According to Pranjul Bhandari, another economist at Goldman Sachs, India's fiscal deficit would decline 6.8 percent in 2010 to 6 percent the next fiscal.

"We think strong capital inflows due to both growth and rate differentials will easily finance the deficit. India may well become a hot spot for foreign direct investment and other growth-related capital flows."  

©IANS