The first working paper by the newly established Macro Unit in ICRIER – Indian Council for Research on International Economic Relations released yesterday forecast the Indian GDP growth for FY 2009-10 at 5.5% [Moderated].
The scenario with “no shock” which is considered as a case that would have been possible in the absence of the financial crisis, provides a growth of 8.4 per cent, which implies a recovery that would have been possible in the absence of the external crisis.
The first case of full impact of the shock gives a GDP growth of 4.8 per cent for 2009-10. The second case which takes into account the impact of both monetary and fiscal stimuli gives a growth 5.5 per cent in 2009-10. The impact of the stimulus packages will occur only in 2009-10. It would be, therefore, realistic to say that the GDP growth rate for 2009-10 would be in the range of 4.8 to 5.5 per cent.
Finally, The global crisis has changed that outlook and instead will deepen and prolong Indian economy’s slowdown. It has dealt a severe blow to investment sentiments and consumer confidence in the economy. A major worry is the severe weakening of India’s fiscal position and balance of payments during this crisis period.