Kamath Expects Indian Economy to Grow at 7% This Fiscal Year

By Douglas Wong

March 7 (Bloomberg) -- India’s economy may grow at 7 percent this financial year and the next, said K.V. Kamath, chief executive officer of ICICI Bank Ltd., the nation’s second- largest lender.

Kamath based his estimate on expectations by members of the Confederation of Indian Industry earlier this month that the January-March quarter would produce faster expansion than the preceding three-month period, he said in Mumbai last night.

India’s growth is slowing amid the global recession as export markets dry up, making it harder to meet the government estimate of 7.1 percent for the year to March 31, following the slowest expansion in five years in the third quarter.

Asia’s third-largest economy will start showing signs of recovery from October as the government “sharply steps up” spending and stimulus packages begin to help improve domestic demand, Home Minister Palaniappan Chidambaram, the country’s finance minister until November, said yesterday in Mumbai.

India will return to 7 percent growth in the second half of 2009, Chidambaram said.

The nation’s economy will need to grow between 7.6 percent to 7.7 percent in the quarter to March 31 to reach 7.1 percent for the fiscal year, which looks like a “stiff” target, Chidambaram said.

India’s central bank cut interest rates for the fifth time since October on March 4. The Reserve Bank of India reduced the benchmark repurchase rate to a record low of 5 percent from 5.5 percent and the reverse repurchase rate to 3.5 percent from 4 percent.

Interest Rates

Reserve Bank Governor Duvvuri Subbarao is lowering policy rates to revive investment and spur consumption. The $1.2 trillion economy is slowing as exports decline and access to funds for companies from overseas and the stock market is cut off by the global recession.

Kamath’s ICICI Bank said yesterday that it was reducing rates on new home loans by as much as 50 basis points. Rates on loans of more than 3 million rupees ($58,120) were cut to 11.5 percent from 12 percent, the bank said. A basis point is 0.01 percentage point.

The ICICI Bank CEO is currently president of the Confederation of Indian Industry, a lobby group, according to the organization’s Web site.

To contact the reporter on this story: Douglas Wong in Mumbai at dwong19@bloomberg.net.