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S&P cuts India's growth forecast to 5.5 per cent for 2012-13 fiscal

Press Trust of India
Sep 24, 2012 at 04:34pm IST

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New Delhi: Standard and Poor's has lowered the growth forecast for India to 5.5 per cent for this fiscal, from 6.5 per cent projected earlier, citing "volatile" global economic situation.

According to S&P, Asia-Pacific is feeling the pressure of ongoing global economic uncertainty and it has lowered India growth forecast by one percentage point to 5.5 per cent for this fiscal from 6.5 per cent earlier.

Lack of monsoon rains has affected India, "for which agriculture still forms a substantial part of the economy", the report said. Moreover, "global investors have become more critical of India's policy and infrastructure shortcomings which was recently highlighted by the power outage in early August that affected 20 of India's 28 states," the report added.

S&P cuts India's growth forecast to 5.5 per cent

The report did not mention anything about the recent reforms push by the Indian government.

The report, however, did not mention anything about the recent reforms push by the Indian government.

Last week, the government effected a steep 12 per cent hike in diesel prices and capped subsidised cooking gas to consumers. Besides, it allowed FDI in multi-brand retail, aviation, broadcasting and power exchanges.

S&P said Asia Pacific economies are witnessing cautious growth conditions and any worsening of the economic conditions in the euro-zone will increase contagion risk for the region as these economies are "sensitive" to capital flows and trade.

"A trifecta featuring a slowdown in China, ongoing troubles in the Eurozone, and a weaker recovery in the US leads us to forecast slower economic growth rates for Asia Pacific," S&P said.

According to S&P credit analyst Andrew Palmer, "Any worsening of the economic conditions in the Eurozone will increase contagion risk for Asia Pacific, given the region's - particularly the open economies' - sensitivity to capital flows and trade."

S&P has lowered the base case forecasts of 2012 real GDP growth by about half a percentage point for some countries, with China's revised to 7.5 per cent (from 8 per cent); Japan to 2 per cent (from 2.5 per cent); Korea to 2.5 per cent (from 3 per cent); Singapore to 2.1 per cent (from 2.5 per cent); and Taiwan to 1.9 per cent (from 2.5 per cent).

Earlier this month, Morgan Stanley had also lowered India's growth forecast to 5.1 per cent for the current fiscal from its earlier estimate of 5.8 per cent; HSBC - 5.7 per cent from 6.2 per cent and Standard Chartered to 5.4 per cent from 6.2 per cent projected earlier.

The growth rate in the first quarter (April-June), according to the data released by the government, has slipped to 5.5 per cent, from 8 per cent in the same period last fiscal.

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