India lowers growth forecast to 8.2%

| August 1, 2011
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India, which is Asia’s third largest economy, has lowered its growth forecast for the current fiscal year to March 2012 to 8.2% from 9%.

The revision comes amid global uncertainty and a series of interest rate hikes to combat stubbornly high inflation.

Last week, the Reserve Bank of India (RBI) raised key interest rates for the eleventh time since March 2010, in a bid to tame inflation in a thriving economy.

The central bank lifted its main rate to 8% from 7.5% as inflation soars on the back of higher food and fuel prices.

Consumer prices in India rose to 9.44% last month – the highest among the Group of 20 leading nations – as food and fuel costs continued to surge.

Annual food inflation has surged, causing major problems for the 450 million people who live below the poverty line in the country.

Prime Minister Manmohan Singh has previously said inflation is a “serious threat” to the country’s growth.

However, despite the revision in growth, India is still the world’s second fastest growing major economy after China.

The economy grew by 9.5% on an annual basis in the second quarter.

In comparison, investment bank Morgan Stanley today slashed India’s growth forecast for the fiscal year to 7.2% from 8.8%, while Goldman Sachs recently said growth will be around 7.2%, revised downwards from 8%.

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