India think tank trims 2008/09 growth forecast

MUMBAI: The economy is seen slowing in the current financial year from a previous estimate, weighed down by an industrial slowdown due to a global credit crisis, think tank Centre for Monitoring Indian Economy (CMIE) said.

CMIE now expects Indian economy to grow at 7.4 per cent in the financial year ending March, from an earlier estimate of 7.5 per cent, it said in a monthly review for January.

The think tank's estimate is higher than estimates of most private economists, who expect growth to clock in around 7 per cent, a six-year low, from rates of at or above 9 per cent in the past three years.

The central bank may slash its growth forecast for the year ending March 2008 at a review next week. It currently projects growth between 7.5-8.0 per cent.

CMIE expects the third quarter growth to be at 6.7 per cent, compared with a robust 7.8 per cent recorded in the preceding two quarters, hit by industrial, trade and transport sectors.

However, a combination of monetary and fiscal measures are likely to help the economy recover from the last quarter of the year, it said.

CMIE said industrial growth in December is likely to be dull as indicated by early estimates released by automobile companies.

Industrial output rose 2.4 per cent in November from a year earlier, rebounding from the previous month's revised decline of 0.3 per cent.

It expects the economy to recover in 2009-10 helped by the government and central bank's stimulus packages announced since December, but expects industrial performance to be subdued at 3.9 per cent for 2008/09, compared with 8.1 per cent a year ago.

CMIE left its inflation forecast for the current financial year unchanged and expects average inflation during 2008-09 at 8.6 per cent, compared with 4.7 per cent in 2007-08.