News: 'Indian economy to grow by 8 pct up to 2008'

(RTR 30/03/2006) New Delhi - India should be able to sustain a GDP growth rate of 8 percent for the next two years but high oil prices remain a concern, a UN report said on Thursday.

The high rate would be supported by expansion of the agricultural sector by 2.5-3.0 percent, 8 percent growth in industry and 8.5 percent in services, said the report by the United Nations' Economic and Social Commission for Asia and the Pacific.

It said India's inflation rate was likely to remain at about 4 percent in this period due to the government's commitment to reform, including strict fiscal prudence.

Industrial and services sectors were expected to sustain the growth momentum, helped by cyclical factors, rising rural incomes and increased public spending on physical and social infrastructure.

But it said that high global oil prices were exerting more inflationary pressure and eroding the country's balance of payments.

"If oil prices rise further by $10 a barrel, GDP growth of a developing country such as India can drop by 0.5 percent, inflation can rise up to 1 percent and current account deficit can widen up to 0.3 percent of GDP," the report added.

Oil prices held above $66 on Thursday after a steeper-than-expected fall in gasoline stocks in the United States ahead of peak summer demand.

Prices have stayed above $60 for more than a month on worries that geopolitical risks in oil exporters such as Nigeria, Iran and Iraq would keep supplies tight.