India's growth to slow down to 8%: ADB

Monetary tightening to contain overheating as well as inadequate infrastructure is likely to slow down India's growth to moderate 8 per cent next fiscal against the expected 9.2 per cent, the Asian Development Bank has forecast.

In a report, 'Asian Development Outlook' released on Tuesday, the multi-lateral agency said the economic growth will again pick up in 2008-09 to stand at 8.3 per cent.

The situation could have been worse if the government had not taken fiscal consolidation measures, Narhari Rao, ADB chief economist in India, said.

Even at the current pace of infrastructure, economy could expand at 8 per cent, but nine per cent and double-digit growth requires infrastructure to expand at much faster rate, he said.

ADB also forecast inflation to come down to a "tolerant" level of five per cent in both 2007-08 and 2008-09 from the present over six per cent.

This is expected to be the result of tighter monetary policy, a rise in agricultural planting, an expected good spring harvest and cuts in import duties on key commodities. The report said domestic overheating is raising demand and has been forcing RBI to respond by raising interest rates.

Rising interest rates will first dampen property demand and then have subtle and wide-ranging consequences in other components, the report said.

"These restraints on demand growth from home buyers, manufacturing investors and consumers will be accompanied by fiscal discipline...These forces are expected to moderate growth rates bringing it down to 8 per cent in 2007-08," the report said.