India think tank cuts growth forecast for 2008-09

India think tank cuts growth forecast for 2008-09

Mumbai: India’s economy would grow at a slower pace than expected earlier in fiscal 2008-09 due to the global credit crisis and a slowdown in some sectors, think tank Centre for Monitoring Indian Economy (CMIE) has said.

CMIE now forecasts the economy grow at 7.5% in the fiscal year ending in March, lowering it from an earlier estimate of 8.2%, it said in its monthly review for December.

“The global liquidity crisis is expected to hit growth significantly in the third quarter," CMIE said.

“Trade, transport, industry and finance sectors are expected to be the worst hit."

CMIE said it has lowered its forecast for industrial output to 4.5% from 6.3% earlier, as it expects the impact of global financial turmoil to remain for the next few months.

It also expects inflation to ease for the rest of the fiscal year. It has forecast an average inflation of 8.6% for 2008-09, from 4.7% in the previous year.

According to CMIE, lending rates are likely to ease further by 0.5 basis points by March 2009, but strong growth in bank credit and large government borrowing will pressure liquidity and discourage banks from cutting interest rates.