Fitch downs India's GDP growth to 7.5 per cent

Fitch downs India's GDP growth to 7.5 per cent

The agency had projected domestic GDP growth of 7.7 per cent earlier. It has also revised the global GDP projection for 2011 to 2.6 per cent from the earlier 3.1 per cent. Many factors like global commodity prices which fuel inflation and the consequent rate hikes by Reserve Bank to cool price rise are said to be affecting domestic growth prospects. “India has hit a difficult part of the cycle, with growth and inflation heading in opposite directions,” Fitch noted.

The headline inflation for August stood at an uncomfortable 9.78 percent. The central bank has raised its key rates 12 times in 18 months to control inflation. “It appears that the combination of rising inflation and interest rates has taken a toll on the consumer (sentiment),” Fitch said, adding factors like volatility in financial markets and uncertainty on fiscal policy would also hurt. “While India is not a trade-oriented economy, the deterioration in global growth prospects will have knock-on effects,” it noted.

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