Finance Minister of India

In spite of the recent slowdown in industrial production (as reflected in the IIP), we expect the Indian economy to register a growth of 9.1 per cent in 2008-09. The growth would be fuelled by the continued rise in capital formation and a continuation of the more-than-six per cent growth in private final consumption expenditure. These are very likely because of the build-up of investment proposals during the current year. Low inflation and an apparent perception of low inflation is expected to keep domestic consumer spending buoyant.

The rising rupee aids this growth story as it reduces the cost of imports of capital goods and also intermediates. India has a trade deficit and therefore the rising rupee helps a larger number of importers than it hurts exporters.

This prediction of a 9.1 per cent growth in real GDP is based on the assumption of an adequate precipitation during the monsoon, and a slight fall in interest rates in the early months of the coming year.