Crisil revises GDP growth projection down to 7% for 2011-12
"Crisil Research has lowered India's Gross Domestic Product growth forecast for 2011-12 to 7.0 percent from its October estimate of 7.6 percent," the ratings firm said in a report.
"The forecast has been scaled down, in view of deterioration in the global economic outlook led by the Eurozone recession, a weaker-than-anticipated domestic investment climate and limited fiscal space to stimulate the economy," it added.
Crisil said said economic growth in the second half (October-March) of the current fiscal is likely to slip to 6.7 percent, from 7.3 percent in the first six months.
"This will restrict the overall GDP growth for 2011-12 at 7 percent. This would be the second-lowest growth in the past nine years after 6.8 percent in 2008-09, during the peak of global financial crisis," the report said.
The country's Gross Domestic Product (GDP) growth slipped to 6.9 percent in the second quarter, the lowest in over two years.
The economic growth in 2010-11 stood at 8.5 percent.
Growth in eight core infrastructure industries dipped to 0.1 percent in October, the lowest in five years.
RBI has already revised its growth projection for the Indian economy to 7.6 percent, from 8 percent earlier.
Finance Minister Pranab Mukherjee said last week that GDP growth in the current fiscal is likely to be around 7.5 percent, far below the 9 percent projection made by the government in its pre-Budget survey.
"The industry growth will remain constrained by lagged impact of RBI's interest rate hikes, weak exports due to slipping demand, particularly from Europe and growing bottlenecks in the mining sector," Crisil said.
RBI has already hiked its key-policy rates 13 times, totalling 350 basis points, since March 2010 to tame demand and curb inflation.
India Inc has blamed the repeated rate hikes, which have led to increased cost of borrowings, for hindering fresh investments and slowing down industrial growth.
Crisil said that while industry is expected to grow by 4.5 percent in the current fiscal, expansion in services will be 8.9 percent.
However, Crisil raised its projection for agriculture growth to 3.8 percent from the earlier estimate of 3.2 percent "on account of the timely and steady progress of the monsoon, which enabled better sowing during the Kharif season and improved prospects for the Rabi crop."
According to the agency, a worsening outlook for the eurozone will affect the rupee.
"A mild recession in the eurozone is expected during the first half of 2012, to be followed by a moderate recovery. In this scenario, the supply of dollars from portfolio inflows will be lower than previous expectations of a recession-free eurozone in 2012.
"Hence Crisil Research has moved up the Rupee/USD forecast to 48 from 45-46," it said.
It also projected government's fiscal deficit to go up to 5.5 percent in 2011-12 against the Budget estimate of 4.6 percent.
"The current revision takes into account rising expenditure burden due to ballooning subsidies and slow revenue growth due to a tepid growth outlook," Crisil said.
The government's fiscal deficit has risen to Rs 3.07 lakh crore, or 74.4 percent of the Budget estimates, in the first seven months (April-October) of 2011-12, as non-tax revenue growth has declined.