ADB cuts India's GDP to 7.9% for FY12

The Asian Development Bank (ADB) today trimmed growth forecast for India to 7.9% for the current fiscal, from 8.2%, in the wake of subdued growth of major world economies and rising crude oil prices.

The ADB's 'Asian Development Outlook 2011 Update', which was released today, has also raised the March 2012 inflation forecast to 8.5%, from 7.8% earlier.

ADB's growth projection is lower than that of Indian government, which expects the GDP to expand at 8.5%.

The revision in the forecast comes within five months of the Asian Development Outlook (ADO) 2011 in April which projected India's growth at 8.2% this fiscal.

"Despite robust overall growth for the year through March 2011, economic momentum slowed reflecting weakening industrial activity and investment," the Update said.

Growth in most advanced economies has declined in the second quarter of 2011 and emerging markets are witnessing a combination of moderation in growth and rising inflation.

The recent downgrade of US Sovereign ratings by S&P and lengthening shadow of the Eurozone crisis all over the market in the world has become a matter of concern.

The ADB report also revised downward India's GDP growth for the next fiscal (2012-13) to 8.3% from 8.8% "due to longer monetary tightening cycle and higher policy rate hikes, than expected earlier."

In its bid to tame inflation, the RBI has been hiking interest rates since March 2010 and is again scheduled to review its monetary policy on Friday. The overall inflation in August stood at 9.78%, much higher than the comfort level of 5-6%.