Govt lowers GDP growth rate to 7.5 per cent

New Delhi: Citing global and domestic reasons, the government today lowered the GDP forecast for the current fiscal to 7.5 per cent from 9 per cent, but exuded confidence of a revival in the next year. "The analysis of several data series and simple macro-econometric modeling lead us to forecast GDP growth of 7.5 per cent (plus/minus 0.25 per cent) during 2011-12," the government said in the Mid-Year Analysis 2011-12 tabled in Parliament.

Compounding with domestic factors like decline in industrial production, the global situation has led to a clear slowdown in the growth rate in the first half of 2011-12 to 7.3 per cent from 8.6 per cent year-on-year, it said. "We expect some revival next year but the outlook remains mixed. If Europe slides into proper recession, with all the attendant financial contagion that will no doubt affect other nations, the entire world economy will slowdown and we could also be impacted," it said.

The analysis, however maintains that with India`s strong fundamentals, and if Europe and the US remain stable, it should be possible for the country to achieve 9 per cent growth in the long run.

On high rate of price rise, the government expects that with demand side pressure moderating following withdrawal of fiscal stimulus and tightening of credit, overall WPI inflation is likely to decline December onwards. "…the current fiscal may end with headline inflation of around 7 per cent," it said.

It further said "maintaining the growth momentum in the economy with price stability is one of the biggest policy challenges that India is facing in recent times," the analysis tabled by Finance Minister Pranab Mukherjee in Lok Sabha said.