Inflation also jumps by 8.58 per cent. Interest rates are expected to rise. To maintain growth, New Delhi must invest in infrastructures and attract foreign investments. However, this could push inflation further up. Corruption remains a major problem.

New Delhi (AsiaNews/Agencies) – India’s GDP rose 8.9 per cent in the third quarter from a year earlier, pushed by demand higher than inflation. Indian Prime Minister Manmohan Singh warned however that to continue on this path, the country must improve its infrastructures. He also noted that inflation was almost twice as high as what the government regards as “ideal.

The wholesale-price inflation rate stood in fact at 8.58 per cent in October, compared with an “ideal” level of 4-5 per cent, this according to Finance Minister Pranab Mukherjee.

The Indian government plans to cut the budget deficit to a targeted 5.5 per cent of GDP, down from a 16-year high of 6.9 per cent last year, caused by high oil and fertiliser subsidies.

India’s central bank, the Reserve Bank of India, will likely raise interest rates in the coming months to remove liquidity from the system and reduce inflationary pressures.

The cost of borrowing will have to increase early next year to keep inflation in check. India’s consumer prices are rising at a pace near 10 per cent, the fastest pace in the Group of 20 nations after Argentina.

The danger is that rising prices will especially affect food and other basic items, hurting tens of millions of people living near the poverty line as well as reduce consumption among the new middle class.

In order to continue its growth, India must attract more foreign direct investments, but this will push up inflation.

At the same time, New Delhi must consider the consequences of the crisis in the United States (2.5 per cent growth) and the European Union (1.9 per cent growth). Unemployment remains high across the West and many national economies are heavily in debt. This could hamper world recovery, reduce trade and push world inflation higher.

Widespread corruption remains another major problem to tackle. Led by the Bharatiya Janata Party, the opposition has been filibustering in India’s federal parliament since 9 November, when it tabled a motion calling for an in-depth investigation of a minister charged with awarding phone licenses at below-market prices.

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