Good agri output betters India’s growth forecast

China, India, Brazil and Russia are powering ahead, the Organisation for Economic Cooperation and Develop-ment (OECD) said on Wednesday, revising upwards its growth outlook for all four largest emerging economies.

With the expected rebound of agricultural output in India, growth should be strong in the near term while inflationary pressures would also remain high amid strong outlook for demand.
The OECD had forecast growth of 7.3 per cent this year and 7.6 per cent in 2011 in its previous report.
“With agricultural output expected to rebound sharply, economic growth should be strong in the near term before moderating to around trend rates,” the agency said.
“The expected rebound in agricultural activity should help limit further increases in food prices, which have been a major contributor to recent high inflation.”
But it said that underlying inflationary pressures are likely to persist given the strong outlook for demand.
OECD said overheating was becoming a problem in China and called for some increase in interest rates and “ideally” a greater exchange rate flexibility.
In its previous forecast in November, the OECD had projected GDP growth of 10.2 per cent this year and 9.3 per cent in 2011. “Measures have been taken to cool the property market but it is important to continue to move towards a more neutral monetary policy stance,” it said.
Russia should use windfall oil revenues to eliminate fiscal deficits quickly but if oil prices and capital inflows continue to increase rapidly the country would face ano-ther boom-and-bust cycle.
In Brazil, infrastructure investment will help lift growth again despite tighter monetary policies and spending cuts. — Reuters

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