The Asian Development Bank (ADB) is confident that the Indian economy would recover to 8-9 per cent growth levels in the medium and long term, ADB President Haruhiko Kuroda said.
The Government’s recent policy stance of consolidating the fiscal situation and steadily reducing fiscal deficit in the coming years would help the economy realise its full potential over the medium term, Kuroda said here on Friday. He, however, said that more reforms and better infrastructure would be key for economic recovery.
Noting that the Indian economy had slowed down in the recent years, Kuroda pointed out that other Asian economies, including China, had also experienced slowdown
Although several Asian economies recovered in 2010-11 due to fiscal and monetary support, they were affected in the subsequent year (2011-12). This was partly due to the aftermath of the sharp recovery from the bottom and also the worsening crisis in the Euro Zone.
Euro Zone impact
Last year, the Euro Zone recorded “negative growth”. This had affected India, China and many other countries.
Kuroda felt that external risks remained for Asian economies, but were less pronounced than last year.
The Euro Zone is likely to have some ‘negative growth’ this year also, according to various economic think-tanks and research outfits.
“If the Euro Zone crisis worsens, the impact on developing Asia will be significant. But we don’t expect significant worsening of Euro Zone crisis. Some risks are there,” he said.
Kuroda pointed out that India had experienced significant slowdown of investment and this may have been caused by several factors, including monetary tightening and delay of deregulation measures.
“Now that the central bank (RBI) has reduced interest rates and the Government has initiated several initiatives, I am quite sure economy will recover in coming months,” he said.
Kuroda met Finance Minister P. Chidambaram on Friday to discuss the upcoming 46{+t}{+h} Annual Meeting to be held at the India Expo Mart in Greater Noida from May 2-5. This will be the third time that ADB will hold its annual meet in India. The first meeting was in 1990 in New Delhi and second in 2006 in Hyderabad.
To a query on the RBI’s growth-inflation balancing act, Kuroda said ADB expected inflation in India to be around seven per cent this fiscal.
“This seven per cent level is still high. The inflationary trend must be carefully monitored. If inflationary pressures continue to decrease, then interest rates could be reduced further, which would facilitate stronger recovery in coming months,” he added.