Now, CMIE too pegs down GDP forecast to 7.8%

MUMBAI: The leading research firm Centre for Monitoring Indian Economy ( CMIE) has scaled down its GDP forecast by a notch to 7.8 per cent for this fiscal from the earlier forecast of 7.9 per cent.

"A sharp downward revision in the forecast for the mining index from 4.4 per cent to 3.2 per cent, manufacturing sector from 7.5 per cent to 6.9 per cent and electricity from 9 to 8.7 per cent has led to a further decline in our GDP forecast for this fiscal from 7.9 earlier to 7.8 per cent," CMIE said in its monthly report here.

Earlier, the Reserve Bank had also reduced its forecast for real GDP growth sharply from 8 to 7.6 per cent. The rating agency Crisil has also revised its growth estimate from 7.7-8 per cent to 7.6 per cent.

"The data releases continue to bring in news of an economy that seems to be in trouble. The index of industrial production growth has slowed down to 2-4 per cent and the wholesale price index-based inflation growth has remained riveted to 9.5 per cent in spite of sustained efforts by the RBI to rein in inflation by raising interest rates," the agency cited as its reasons for the sharp downturn in the economic growth.

"The persistent fall in the IIP and the high inflation rate almost seem to suggest that the economy is headed towards stagflation," it warned.

However, this is clearly refuted by the robust growth in sales of companies, which grew by a handsome 25 per cent in the first half of the year.

Sales of manufacturing companies adjusted for inflation indicate that the IIP under-estimates growth in the manufacturing sector by about 33 per cent. In the first half, the real sales of manufacturing companies grew by about 9 per cent, indicating robust demand for industrial goods, it pointed out.