May revise India growth forecast for 2011-12 to 6.5%: Moody’s

Monday, 5 December 2011 00:01 -     - {{hitsCtrl.values.hits}}

NEW DELHI: Global ratings major Moody’s has said that tough times are ahead for the Indian economy and it may revise downwards the country’s growthforecast for 2011-12 to 6.5 per cent.

“We may need to revise our 2012 growth outlook from the current rate of 7 per cent and towards something like 6.5 per cent... It looks like tough times are ahead,” Moody’s Analytics said in a report.

The country’s Gross Domestic Product (GDP) growth slipped to 6.9 per cent in the second quarter, the lowest in over two years. For the first half (April-September) of the fiscal, the average growth rate stood at 7.3 per cent.

The economic growth in 2010-11 stood at 8.5 per cent. Growth in eight core infrastructure industries dipped to 0.1 per cent in October, the lowest in five years.

RBI has already revised its growth projection for the Indian economy to 7.6 per cent, from 8 per cent earlier.

Yesterday, Finance Minister Pranab Mukherjee said that GDP growth in the current fiscal is likely to be around 7.5 per cent, far below the 9 per cent projection made by the government in its pre-Budget survey.

Moody’s said that the economy is struggling under the weight of higher interest rates but this had failed to achieve the objective of cooling inflation, which have been above the 9 per cent mark since December last year.

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.

“It is difficult to see this (economy) turning around any time soon, especially as the troubles in Europe appear to have some way still to play out,” Moody’s said.

While Moody’s has hinted as revising India’s growth forecast downwards, even its existing 7 per cent economic growth projection for the current fiscal is less than that of many other global institutions and ratings agencies.

It is also less than the projections made by the Organisation for Economic Cooperation and Development (OECD), Centre for Monitoring of India Economy (CMIE), Crisil and ICRA, who have all put growth to be between 7.3 per cent and 7.6 per cent.

Finance major Citigroup last week revised downwards its growth forecast for the Indian economy to 7.1 per cent, from the earlier estimate of 7.6 per cent, for 2011-12 on account of global slowdown and domestic factors like impact of tight monetary policy.