New Delhi: India is likely to revise down its growth forecast for the current fiscal year, currently 9%, a senior official said, which would bring the government’s view closer to the outlooks of private sector economists.
Early this month, the Reserve Bank of India (RBI) raised interest rates by 50 basis points, its ninth increase since March 2010, and said that some short-term growth would need to be sacrificed in order to tame high inflation.
“Directionally, I expect some downward revision in growth. But I can tell you it will not be much,” Kaushik Basu, the chief economic adviser to the finance ministry, said at a media briefing on Friday.
Basu did not say what the new growth forecast would be for the current fiscal year but said that the new forecast would be made in June.
With headline inflation still high at 8.66% despite the RBI’s ongoing policy tightening, more rate increases are expected and many officials have scaled-back their growth forecasts for the fiscal year that ends in March 2012.
Many private forecasters have also lowered their growth expectations this year for Asia’s third-largest economy, with Goldman Sachs cutting its outlook last month to 7.8% from 8.7%.
While food inflation has eased below double digit levels seen earlier this year, fuel inflation is still a worry. High global crude prices have forced the government to allow a rise in petrol prices, which is expected to further stoke inflationary pressures in the economy.
A senior official in India’s revenue department said earlier this week that interest rate rises may hit corporate profitability, slow growth and eat into the government’s revenue.