India`s growth to moderate next fiscal year: Survey

India's economic growth is on track to accelerate in 2010/11 on the back of monsoon rains but expectations for growth in the following year have moderated slightly, a quarterly Reuters poll shows.

Analysts raised their expectations for how far the Reserve Bank will lift rates in the fiscal year to the end of March 2011, reflecting signs that demand pressures, especially for consumer durables, are building in Asia's third-biggest economy.

A survey of 21 economists produced a median forecast that the economy would grow 8.4% in the year ending March

2011, unchanged from a similar poll conducted in July and up from growth in 2009/10 of 7.4%.

They projected growth of 8.3% in 2011/12, slightly below 8.5% forecast in July.

"Rising cost pressures and global uncertainties are likely to have a sobering impact on India's growth momentum," said Rupa Rege Nitsure, chief economist at Bank of Baroda.

Wholesale price inflation is forecast at 8.3% at the end of 2010/11, similar to current levels, before moderating to

5.7% the following year. This compares with 8.6% and 5.5%, respectively, in the previous poll.

The Reserve Bank expects WPI inflation to ease to 6% in March 2011.

The cut in forecasts for inflation at the end of the fiscal year reflect the view that a healthy monsoon will bring down food prices, which have a big influence on the headline index.

However, rising demand for consumer durables, such as cars, will need sterner action from the central bank than previously forecast because of the risk that these price pressures can filter more broadly through the economy.

The Reserve Bank of India (RBI) has raised its short-term lending rate by a total of 125 basis points in five moves in

2010 to 6%, but is seen to be nearing the end of its current tightening cycle.

The poll forecast that the RBI would raise the repo rate, at which it lends to banks, by another 50 basis points to 6.50% by the end of March 2011.

Just one more 25 basis point hike is expected in the following fiscal year.

The rupee is forecast to be around current levels at the end of December, but is seen appreciating by about 1.2% between now and the end of March. It is up 4.3% so far in 2010 after having climbed 4.7% in 2009.

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