The Indian economy would continue to clock a robust over 9 per cent growth in FY 09, the Centre for Monitoring Indian Economy said in its monthly report on Monday.
"We had predicted a growth of 9.1 per cent in our first forecast in February 2008, which was revised up to 9.5 per cent in June 2008. We now believe that the economy would grow by 9.4 per cent in FY 09," CMIE said.
This marginal change is because of a downward revision in its estimate of the growth of the industrial sector, it said.
CMIE had predicted a growth of 11.4 per cent in industry. However, following a slowdown in the output of a few industries, "We now believe that the industrial sector would grow by 11.1 per cent and not 11.4 per cent as predicted earlier," the report said
Prominent industries that have warranted a decline were cement, sugar, glassware and milk powder, CMIE said.
In fact, two official documents released earlier also indicated that the Indian economy was headed for a slowdown in FY 09.
The Reserve Bank of India had predicted that the real GDP would grow by 8-8.5 per cent in FY 09. But, the RBI Governor, brought this down to about 8 per cent.
The Economic Advisory Council of the Prime Minister, on the other hand, projects that the economy would grow by 7.7 per cent.
The EAC expects to see both investment and consumption expenditure growth to slow down a bit.
CMIE's relatively upbeat forecast reflects two departures from the observations made by other forecasters.
First, CMIE considers the Index of Industrial Production (IIP) to be faulty and does not consider its sharp slowdown in Q1 FY 09 to be a reflection of the reality.
Alternate sources of data indicate that the industrial sector has recovered from its recent slowdown and aggressive investments currently under implementation to create new capacities would accelerate industrial growth in FY 09.
However, the faulty IIP may contribute to a slower growth estimate of GDP in the first quarter of FY 09 scheduled to be released by the Central Statistical Organisation by the end of August. This could further cast a gloomy spell, CMIE said.
Secondly, CMIE does not think that inflation is extraordinarily high as to hurt growth. The WPI is an inappropriate measure of inflation. The CPI, a more appropriate measure has seen a less vicious rise.
"We believe that inflation itself is unlikely to hurt growth, but, if the RBI persists with its policy to contain liquidity any further, it may hurt growth," CMIE report said.
So far, despite the RBI's policy stance, credit growth has been robust and business as seen in the growth of corporate sector's sales has been brisk.
Corporate India, with overflowing order-books, continues to invest into new capacities aggressively and affirming its faith in the Indian economy, notwithstanding the gloomy forecasts and the faulty IIP statistics, it said.
