Comments
New Delhi, Apr 3 Credit rating agency Fitch today downgraded Indian economy’s growth projection to 8.3 per cent for 2011-12 on account of high inflationary pressures that has forced the Reserve Bank to hike key rates.
The agency had earlier projected the country’s growth for the current fiscal at 8.5 per cent. It, however, kept its projection for 2012-13 unchanged at 8 per cent.
“India’s economy grew 8.7 per cent in FY’11 (the year to end-March 2011) on the government’s estimate, in line with Fitch’s expectation. The agency revised its FY’12 growth forecast down marginally to 8.3 per cent from 8.5 per cent as inflation is easing less quickly than anticipated,” Fitch said in its report - Global Economic Outlook (GEO).
The wholesale prices rose 8.3 per cent in February 2011 compared to the year-ago period, which is up from 8.2 per cent in January, it added.
“Further tightening from the Reserve Bank of India (RBI) seems likely, leaving an already slowing economy facing an awkward combination of stubbornly high inflation and more headwinds from further policy tightening,” Fitch commented.
Last month, the RBI in its mid-quarterly policy review had raised repo (short-term lending) and reverse repo (borrowing) rates to 6.75 and 5.75 per cent respectively.
This was the eighth time the central bank hiked its key policy rates since March 2010 to fight rising inflation that at present remains much above the RBI’s comfort level of 5-6 per cent.
“The persistence of inflation has led Fitch to revise up its annual average inflation forecast for FY’12 to 7 per cent from 6.5 per cent in the December GEO.
“A 10.6 per cent rise in food prices drove the overall index, but machinery and electrical goods prices accelerated, too (up 3 per cent and 4.1 per cent, respectively),” the report said.
India is not the only country that has been estimated to grow at slower than the projected rate; even neighbour China’s rating has also been downgraded due to higher prices in the country.
“Fitch forecasts China’s economy to grow 8.9 per cent in 2011 and 8.7 per cent in 2012, a modest downward revision from the previous forecast of 9 per cent each year, as policy tightening to control inflation continues,” the report opined.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.