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S&P prunes India GDP growth forecast to 5.5%

24 Sep 2012 Evaluate

Notwithstanding the series of reforms the government announced in the past two weeks, rating agency Standard & Poor's (S&P) today scaled down India's GDP growth forecast to 5.5%. The S&P forecast is part of a broader report on Asian economies, where the agency also slashed China’s gross domestic product (GDP) growth forecast to 7.5% from 8% and Japan’s to 2% from 2.5%. The rating agency, which has added to the spate of downgrades from global investment banks and rating agencies, in April, had lowered its outlook on India's sovereign rating of `BBB-' to negative. 

Besides, slew of rating agency and global investment banks slashing its outlook on India’s GDP growth, Prime Minister's Economic Advisory Council (PMEAC) foreseeing global headwinds, sluggish policymaking, high interest rates and worries about a drought in parts of the country suppressing investment and demand, also slashed its economic growth projections for the current fiscal to 6.7% from an earlier 7.5-8%. Further, India’s plan panel also lowered annual average economic growth rate to 8.2% in the 12th Five Year Plan (2012-17) from earlier average economic growth rate of 9% due to lower economic growth and lack of appropriate policy measures.

However, driven by higher-than-expected performance on the agriculture front, India’s GDP grew at 5.5 per cent in the June 2012 quarter after declining in eight consecutive quarters. Agriculture emerged as the only saving grace for the sagging economy, which witnessed a near-stalling of industrial activity. Agriculture came in at better than expected at 2.9 per cent, as against major economists’ estimates at 2 percent.

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