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Mumbai, Dec. 7

THE rupee is expected to remain bearish and see 47.5 by December 2006, a senior official of JP Morgan Chase Bank, said.

"The rupee is seen bearish as the trade deficit continues to expand, leading to a worsening of the current account balance, while capital inflows are unlikely to make up the difference," Mr Rajeev Malik, Vice President and Senior Economist, JP Morgan Chase Bank said.

Current account deficit, which was at 0.9 per cent during 2004-2005, is expected to touch 2.2 per cent of the GDP in 2005-2006, 2.8 per cent in 2006-2007 and 3 per cent in 2007-2008, he said.

A further deterioration of the current account will put more pressure on the currency.

While the Indian economy is expected to end the current year at 8 per cent, fiscal side remains an issue. "We feel confident about medium-term growth at seven per cent," Mr Malik said. JP Morgan raised its growth estimate for India to 8 per cent from its earlier projection of 7.2 per cent. Its forecast for next year puts growth at 7 per cent.

JP Morgan has pegged fiscal deficit at 4.5 per cent while budget forecast put it at 4.3 per cent.

(This article was published in the Business Line print edition dated December 8, 2005)
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