Thaindian News

Mumbai, June 4 (IANS) Ratings agency Crisil Monday cut its India’s economic growth forecast for the current financial year to 6.5 percent from its previous 7 percent due to uncertainty in the eurozone, muted investment demand, and a policy logjam.

The forecast has been scaled down in view of rising downside risks from recession in the eurozone, muted domestic investment demand, a domestic policy logjam, and limited fiscal and monetary space to stimulate the economy, Crisil said in a report.

In its previous report released in March 2012, Crisil had pegged India’s gross domestic product (GDP) growth at 7 percent for fiscal 2012-13.

“With rising uncertainty in the eurozone, muted investment demand, and a policy logjam, GDP growth in 2012-13 will remain around the 2011-12 level of 6.5 percent,” Crisil said.

As per the data released by the Central Statistics Office last week, India’s GDP growth fell to 6.5 percent in 2011-12. In the fourth quarter of the financial year ended March 31, economic growth slumped to nine-year low of 5.3 percent.

Crisil said it has revised downward the growth in service sector to reflect the sluggish IT and IT-enabled services as a result of slowing export demand from the eurozone, and slower-than-earlier-anticipated growth of hotels, trade and transport sector due to moderation in private consumption growth.

Although industry may benefit from expansion of the mining sector on a low base, manufacturing and construction growth will remain weak due to limited scope for reduction in interest rates, and weak investment demand, Crisil said.

“Sub-normal monsoon and a further worsening of the eurozone situation can create downside risks to our tepid growth forecast of 6.5 per cent for 2012-13.”