Mumbai: India’s largest credit rating agency Crisil Ltd on Tuesday downgraded the country’s gross domestic product (GDP) forecast for fiscal 2012-13 to 5.5% from 6.5%, citing deficient rainfall and economic uncertainty in Europe.
The inflation forecast for 2012-13 has been increased to 8% from 7% as the deficient rainfall will have an adverse impact on food prices.
The India Meteorological Department expects a 15% rainfall deficit in the June-September 2012 monsoon season.
Crisil’s move follows a similar one by the Reserve Bank of India (RBI) at the end of last month.
The Indian central bank pared its growth projection for fiscal 2013 to 6.5% from 7.3%, and raised the year-end inflation forecast to 7% from 6.5%, citing global and domestic risks.
Crisil also said it expects the fiscal deficit to worsen to 6.2% of GDP from 5.8%.
“The increase in the fiscal deficit-to-GDP ratio largely reflects lower revenue growth as a result of slowing GDP growth. In case of a substantial fiscal stimulus to the economy, the fiscal deficit to GDP ratio could worsen further,” Crisil said.
“Swift policy action to solve issues related to mining, land acquisition and speedy clearance of projects can create upside to the growth projection,” the rating agency said.