India's GDP growth projection for the current financial year has been pegged down to 7.9 per cent from the earlier projection of 8.2 per cent, according a Reserve Bank of India Survey.

In its First Quarter Review of Monetary Policy 2011-12 on July 26, the RBI had stuck to its baseline projection of real GDP growth for the current year at 8.0 per cent.

The Survey of Professional Forecasters on Macroeconomic Indicators had revised the real GDP growth rate forecast downwards to 8.2 per cent in its May survey from 8.5 per cent in the earlier survey.

The latest round of survey has revised projections for agriculture, industry and services growth to 3.5 per cent (3.1 per cent in the May survey), 7.4 per cent (8.2 per cent) and 9.0 per cent (9.6 per cent) respectively.

Inflation

In the latest round, forecasters have assigned the highest probability (32.8 per cent) that wholesale price index (WPI) based inflation will fall in the 7.00-7.90 per cent range by end-March 2012, with a ‘strong' downward bias.

In the previous survey, forecasters had assigned the highest 30.2 per cent chance that inflation will fall in the 7.00-7.90 per cent range by end-March 2012, with a downward bias.

In its First Quarter Review of Monetary Policy 2011-12, the RBI had revised the baseline projection for WPI inflation for March 2012 upward to 7.0 per cent. In its May 3 policy statement, the RBI had projected the WPI inflation for March 2012 at 6.0 per cent with an upward bias.

Policy rates

The forecasters expect repo rate (the interest rate that the RBI charges banks for providing them liquidity) to be at 8.00 per cent in end-March 2011-12, revised upwards from 7.25 per cent projected in the last survey.

In its First Quarter Review of Monetary Policy, the RBI increased the repo rate by 50 basis points to 8.0 per cent to rein in the rising inflationary pressures.

Fiscal Deficit

The Central Government's fiscal deficit is forecast at 5.3 per cent of GDP in 2011-12, revised upwards from 5 per cent in the last survey. The combined gross fiscal deficit of the Centre and States is placed at 8.0 per cent of GDP in 2011-12, revised upwards from 7.6 per cent in the last survey.

Bank Credit

In 2011-12, bank credit is expected to grow at 19 per cent, revised downwards from 20 per cent in the last round of survey.

In its First Quarter Review of Monetary Policy, the RBI had revised the non-food bank credit growth projection downwards from 19 per cent to 18 per cent by the RBI.

Corporate Sector Profit Growth

The profit growth of corporate sector (of BSE listed companies) in 2011-12 has been projected at 12.2 per cent, revised significantly downwards from 20 per cent in the previous round survey.

(This article was published on August 12, 2011)
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