Unctad's GDP projection is broadly in line with forecasts by Indian agencies like the Reserve Bank of India and the Prime Minister's Economic Advisory Council, which have projected a growth rate of 7.9 per cent and 7.7 per cent respectively in 2008-09, as against 9 per cent recorded in 2007-08.
Finance Minister P Chidambaram expects the Indian economy to expand by more than 8 per cent this year.
Releasing the Unctad report on Thursday, Nagesh Kumar, director general, Research and Information System on Developing Countries said the Indian economy was expected to grow by at least 8 per cent in 2008-09. "We do not see a major sluggishness in the economy.
Moreover, the pay commission award will also add to the GDP growth. This will improve demand. In 1996, when the last government pay revision was announced, GDP growth increased by at least one percentage point," Kumar said.
The Unctad report also blamed speculation as one of the key reasons for increase in commodity prices seen across the world.
The report observed that the rise in commodity prices since 2002 and the slow supply response had resulted in low inventory levels in many countries, giving rise to speculation.
"Although there is no conclusive evidence of the extent to which speculation is contributing to commodity prices so far, there can be little doubt that it has significantly
amplified price movements originally caused by changes in market fundamentals," the report said.
According to Unctad, the recent spike in commodity prices and the subprime crisis in United States, which were seen at the same time was more than a mere coincidence. "Speculators looking for high returns in the short run may well have sensed strains arising in world food markets and readjusted their portfolios to contain a greater share of commodity futures contracts," the report adds.
The report found that global commodity prices have risen by over 113 per cent between 2002 and 2007. While crude oil prices increased 185 per cent in the period, food items became expensive by 65 per cent, vegetable oil prices rose 93 per cent and mineral ores by 261 per cent.
Unctad said that supply and demand shocks, which triggered the price explosions, varied from commodity to commodity.
While price increases in wheat were due to adverse weather conditions, resulting in lower yields in Australia and Europe, maize became more expensive because it was used to produce biofuel in United States. Maize output for biofuel production in United States doubled between 2006 and 2008.
Moreover, increasing income growth in fast growing developing countries was also pointed out as a reason for increase in prices of food items.
"As standard of living in these countries has been improving, consumers have not only been demanding more food but are also changing their dietary habits, leading to increased demand for livestock and consequently animal feed," the report said.
