Indian growth to slow to 5.5 pct in 2009 - Calyon

MUMBAI - India's economy is expected to slow to 5.5 percent in 2009 as domestic demand drops and exports falter, Calyon said in a note.

Economic expansion is expected to slow to its lowest since 2002 as the effects of the global crisis filter into the broader economy but steps taken by authorities will push up growth from 2010, the French bank said.

Growth is expected to slow to around 7 percent level in the current fiscal year ending March from rates of at or above 9 percent in the last three years.

"If the US economy eventually stabilises in the second half of 2009, India's growth could return to its medium-term potential in 2010 and beyond," Sebastien Barbe and Eric Tsang, strategists at Calyon wrote in the note on Wednesday.

The International Monetary Fund expects Asia's third-biggest economy to expand at 5.1 percent in 2009 and Reserve Bank of India governor said last week 2009/10 was going to be a more difficult year than the current financial year.

Calyon said the economy's ability to bounce back in 2010 was due to its low degree of trade openess as compared to other Asian economies with exports amounting to 14 percent of GDP in 2007 softening the impact of the global crisis on the domestic economy.

"This, combined with the aggressive monetary loosening by the RBI to spur domestic activity should help India position themselves as one of the countries to recover first when the global economic backdrop stabilises," they said.

Calyon expects the economy to grow by an average 6 percent in the next decade and expects interest rates to remain around the current low levels due to falling inflation and as the central bank takes steps to stimulate growth.

It has slashed its key lending rate by 350 basis points since mid-October, reduced banks' cash reserve requirements aggressively and has thrown fund lifelines to real-estate firms and mutual funds to unclog frozen credit markets.