Crisil lowers India GDP growth to 7.5 pc

Crisil lowers India GDP growth to 7.5 pc

Growth forecast has been scaled down in view of deteriorating global economic scenario: Crisil.

Ratings agency Crisil today lowered its projection of India’s economic growth in the 2011-12 financial year to 7.6 per cent from its earlier estimate of 8 per cent on account of the deteriorating domestic investment climate and global economic uncertainty.

“The forecast has been scaled down in view of the deteriorating global economic scenario and the grim investment climate in India on account of the policy environment,” Crisil said in a statement.

The forecast for the Indian economy is based on the assumption that developed economies will witness a slowdown,but another recession will be averted,it said.

In May,Crisil had projected the economic growth rate of the country in FY’12 at 7.7-8.0 per cent.


During the first quarter of the current fiscal,the Indian economy grew by 7.7 per cent.

“While we had anticipated the impact of rising interest rates and slowing government expenditure,the deceleration in advanced countries has been sharper than expected. This,in conjunction with the weak investment climate,is impacting India’s GDP growth prospects. We now project the Indian economy to grow at 7.6 per cent in 2011-12,” said Crisil Managing Director Roopa Kudva.

The industry is projected to grow at a slower rate of 6.5 per cent in 2011-12,as against the previous forecast of 7.3 per cent.

Besides the adverse impact of interest rate hikes,regulatory hurdles in the mining sector (an important source of raw material) are likely to hamper industrial activities.

The slowdown in the industrial sector is expected to spill over to services and will affect sectors such as trade,hotels and investment-led services like banking,she said.

“Overall,we now expect services to grow at 9.2 per cent this year as compared to our previous estimation of 9.4 per cent. Normal monsoons and good sowing,however,have led us to upwardly revise the agricultural GDP forecast for 2011-12 to 3.2 per cent from 2.7 per cent,” she added.

In addition,Crisil’s WPI inflation forecast for 2011-12 has been revised upward to 9.1 per cent from the earlier projection of 8.0-8.5 per cent.

“Inflation in the first five months of the current fiscal,at 9.6 per cent,has surged past our earlier expectations,” Kudva said.

In addition,Crisil said the recent rupee depreciation will limit the positive impact of a decline in commodity and oil prices.

Crisil has also revised its outlook for the rupee to 45-46 per US dollar by March,2012,from the earlier projection of Rs 43-44/USD per dollar.

According to Crisil Chief Economist Dharmakirti Joshi,the worsening global outlook and the consequent risk aversion in emerging markets has affected FII inflows into India,thereby reducing the supply of US dollars in the country.

Simultaneously,rising repayment pressure on external debt held by the private sector has led to increasing demand for US dollars. The ensuing imbalance has necessitated the change in the rupee outlook,it said.


If there is no double-dip in advanced countries,FII inflows may pick up in the early part of 2012,as risk appetite for investment in emerging markets will return. This would help strengthen the rupee,it added.