Mumbai: JPMorgan has cut its forecast for India’s economic growth in the fiscal year starting 1 April to 7% from 7.5%, which would be the country’s slowest pace of expansion in six years.
Asia’s third-largest economy grew an average of 8.75% in the past four fiscal years and the government estimates growth of 8.7% in 2007-08, which runs to the end of March.
“India’s GDP revision owes to expectation of moderation in growth in industry and service sectors that will likely be greater than what was reflected in the prior forecast,” JPMorgan economists Rajeev Malik and Gunjan Gulati said in a report.
“Growth is poised to pick up to 8% in 2009-10, and the medium-term favourable structural dynamics remain in place,” the economists said. Their forecast for 2008-09 is much lower than the expectations of the government and the central bank.
In January, central bank governor Yaga Venugopal Reddy said India should aim for a growth of at least 8.5% in 2008-09, and Finance Minister Palaniappan Chidambaram said this month he expected the economy to grow by at least 8.8%.
JP Morgan said India was better insulated against a downturn in the global economy than other emerging Asia economies because it was relatively less open.
“Admittedly, some sectors such as information technology services are more heavily dependent on the US, and will likely suffer more,” the report said.
The economists did not change their forecast on official interest rates. They expect the central bank to cut its repurchase rate by 25 basis point at a policy review in July.
The repo rate, the central bank’s short-term lending rate through which it injects cash into the banking system, has been at 7.75% for almost a year.