Fitch pegs down growth to 7.5pc

Mumbai: Fitch Ratings today marginally revised downwards the growth projection for the economy to 7.5 percent this fiscal due to weak global situation coupled with domestic concerns arising from inflation and series of rates hikes.

The agency had projected domestic GDP growth of 7.7 percent earlier.

It has also revised the global GDP projection for 2011 to 2.6 percent from the earlier 3.1 percent, a statement issued here said.

The domestic economy had clocked 8.5 percent growth last fiscal, on the back of which the government had first projected a 9 percent growth in the Budget but revised it downwards to 8.2 percent recently following the worsening of the Eurozone sovereign debt crisis as well as the fear of a double-dip recession in the US.

Many factors like global commodity prices which fuel inflation and the consequent rate hikes by Reserve Bank to cool price rise are said to be affecting domestic growth prospects.

"India has hit a difficult part of the cycle with growth and inflation heading in opposite directions," Fitch noted.

The headline inflation for August stood at an uncomfortable 9.78 percent. The central bank has raised its key rates 12 times in 18 months to control inflation.

"It appears that the combination of rising inflation and interest rates has taken a toll on the consumer," Fitch said, adding other factors like volatility in financial markets and uncertainty on fiscal policy would also hurt.

The agency said it expects the Reserve Bank to "take a more cautious approach" on the monetary policy front going ahead given the deterioration in the global economy.

"While India is not a trade-oriented economy, the deterioration in global growth prospects will have knock-on effects," the report concluded.