Optimism prevails for India in 2007.

India`s one-billion-plus population are buying more cars, phones, homes and goods than ever before and its companies have expanded quickly to meet demand domestically and to tap overseas business through acquisitions." So says a December 25, 2006 wire service filing by Agence France-Presse (AFP).

The AFP also says that while boom times in India will continue into 2007, growth is likely to be slightly slower. A local economist quoted in the story estimated 2007 growth at 7.8 percent down from 8.2 percent forecast for 2006.

Similar views were echoed by a December 31, 2006 story by the Press Trust of India (PTI), India's biggest news service. "India's boom time seems set for a replay in 2007 driven by industrial and services sector expansion, though high inflation in 2006 raised doubts about overheating in the world's second fastest growing economy."

PTI also reported that the government was planning on a 9.0 average annual growth rate over the next four years. PTI quoted the Prime Minister as saying this plan was "ambitious but feasible." Moreover, the government thinks this goal can be accomplished without stimulating inflation.

The government said there were five reasons why the 9.0 percent average annual rate of growth was doable. First, the country's current account deficit was "no cause for alarm." Second, additional production capacity is available and can support a higher growth rate. Third, currency trading was "orderly." Fourth, India's stock market is doing well. And fifth, history supports the idea that an economy can grow at very high levels "for years on end."

The PTI pointed out, though, that inflation was already pushing 5.0 percent, and could be a problem even as the Reserve Bank of India (RBI) said the economy could live with 4.0 percent.

There is also concern on the part of bank officials that inflation has struck consumer products regularly purchased by average Indian households.

"While economists are wondering whether India can sustain the pace of over eight per cent in 2007 as well, 2006 painted an eventful macro economic picture, bringing India next only to China in terms of GDP growth," said PTI.

One other reason that the government might be able to maintain extraordinary rates of growth was articulated by a local economist in the AFP story cited above. He said that India was likely to spend heavily on infrastructure projects, which could improve the efficiency of the agricultural sector.

While it is probable that India will continue to grow rapidly, three out of the five reasons the government articulated for its optimism depend on highly volatile financial trading factors-not necessarily reliable forecasting tools.

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