India's consumers less 'euphoric'.

As reported in the January 2007 edition of Market: Asia Pacific (16:1), India's economy is likely to grow at impressive rates during 2007, even though growth in the Indian economy is not likely to equal the average growth of International Monetary Fund (IMF) GDP figures from 2003 through 2007 of 7.9 percent. Domestic demand and the country's exports are responsible for most of its growth.

The consumer boom in India is not exactly breaking news, but the repercussions forecast for 2007 could be. Quoting unnamed "analysts," Agence France-Presse (AFP) said on December 23, 2006 that India's central bank was taken aback by early December 2006 reports of price increases, particularly wholesale inflation. The logical conclusion derived from that observation is that the central bank is more than likely to increase interest rates during 2007 to cool an overheating economy.

This could be responsible for the forecast slowing of economic growth.

The IMF estimates that India's GDP will decline a full percentage point from 8.3 percent in 2006 to 7.3 percent in 2007. To say the least, for a country with such a huge consumer base (over 1-billion people in 2006, according to the Population Reference Bureau) even the 2007 rate of GDP growth is a prodigious figure.

The AFP story adds the detail that the central bank's interest rate efforts in 2007 will be specifically directed at consumer spending. The predicted rise in prices is caused mainly by increasing costs for food and raw materials.

The central bank's worries and intentions have been widely publicized in India, and the country's middle class consumers appear to be chagrined. On January 13, 2007, The Times of India (Gurgaon) reported on the latest round of the MasterCard Worldwide consumer confidence survey. The resulting MasterIndex for India fell 11.3 points when compared with the same survey done six months ago. The current MasterIndex is 65.1 points.

The Times report quoted the director of a local economic think tank as saying the fall in confidence merely indicated that India's consumers were not quite as euphoric as they were in the previous three MasterCard surveys (conducted every six months.)

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