Ratings agency Crisil on Monday pared its forecast for the country?s economic growth in 2011-12 to 7.6% from its earlier projection of 8%.
Besides the slowing global economy, the rating agency blamed the government?s policy inaction for the projected lower economic expansion. However, it raised its forecast for inflation to 9.1% in 2011-12, from its previous estimate of 8%-8.5%. It said the recent rupee depreciation would limit the positive impact of a decline in commodity and oil prices, one of the key variables that feed into inflation.
Crisil said the current forecast was based on the assumption that the developed economies would witness a slowdown, but another recession would be averted.
But it said that in case there was a recession, the chances of which were high in Europe, the growth could be impacted even more. In May this year, Crisil had projected the country?s GDP to grow in the range of 7.7%-8% in 2011-12. GDP grew at 7.7% in the first quarter of the current fiscal.
?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,? said Crisil Managing Director Roopa Kudva.
The industry is projected to grow at a slower rate of 6.5% in 2011-12, as against the previous forecast of 7.3%. Besides the adverse impact of interest rate hikes, regulatory hurdles in the mining sector 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% this year as compared to our previous estimation of 9.4%. Normal monsoons and good sowing have led us to upwardly revise the agricultural GDP forecast for 2011-12 to 3.2% from 2.7%,? said Kudva.