New York, Dec 19 (IANS) India's high growth level may slow down and government's reforms may get hobbled as the main political parties concentrate on drumming up support in the run up to the elections due next year, a strategic consulting firm has reported.
Noting that forecasts of gross domestic product growth for the financial year 2007-08 are being revised downwards to 8.4-8.6 percent (one percentage point below last year's growth rate), Oxford Analytica said this reflects the impact of a credit squeeze initiated by the Reserve Bank of India (RBI) to combat inflation, which reached six percent earlier this year.

A summary of the India analysis by Britain-based Oxford Analytica, which boasts a roster of 1,000 scholars at Oxford and elsewhere, was posted on the website of Forbes magazine Tuesday.

The analysis says RBI's credit squeeze has been severely felt in manufacturing, where growth fell to 8.6 percent year-on-year in the second fiscal quarter from 12.7 percent in the same period last year.

Growth in visible exports, which has run at 20 percent for the last five years, may be negligible in 2007-08.

On the positive side, the report said that growth in agriculture, a perennial under-achiever, may accelerate following a favourable monsoon.

Capital goods industries are also growing fast, serving an expansion of infrastructure, which will support the economy in the long run. This expansion is also attracting larger inflows of foreign direct investment, which should reach record levels ($8 billion) next year.

The report adds that a recession in developed economies might increase outsourcing work to India, noting that services, which account for over half of the country's economy, continue to grow at a healthy 8-10 percent.

Added to these are remittances from Indian workers overseas to the tune of $25 billion-$28 billion this year, which will help the current account deficit to close to 1-2 percent of GDP.



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