Hong Kong brokerage CLSA reduces India's FY12 GDP forecast to 6.7%

Hong Kong-headquarterd brokerage CLSA has reduced its GDP growth forecast for India from 7.3 per cent to 6.7 per cent for the current fiscal year ending March 2012, citing cyclical deceleration caused by high interest rates, policy inertia and the "adverse impact of global headwinds".

The Reserve Bank on Thursday said, the Indian economy is likely to grow below its projection of 7.6 per cent this fiscal, and is likely to revise downward the forecast in its policy review next month.

RBI Governor D Subbarao said that the targeted growth may not be achieved on account of several factors such as high inflation and the depreciating rupee.

Analysts expect the central bank is likely to revise downwards its GDP projection in its 3rd quarter review of monetary policy on January 24, during which it will come out with revised forecast for year-end inflation.

In October, RBI had cut the GDP growth forecast for 2011-12 to 7.6 per cent, from 8 per cent. Earlier this month, the government lowered its full-year growth forecast to between 7.25 and 7.75 per cent down from 9 per cent  projected in February.

Earlier in the week, Montek Singh Ahluwalia, the deputy chairman of the Planning Commission had said, the economic deceleration is expected to continue in October-December quarter (Q3), adding, India's October-March growth rate may not top 7.3 per cent and may end FY12 with 7 per cent  GDP growth rate.

Yesterday, Atsi Sheth from Moody's Investors Service said it expects India's GDP growth to come in at 6 per cent  this fiscal, but says that it is likely to better than the other Baa3-rated countries. ''Balance of payment situation is bad, but is not of immediate concern to India,'' she added, ''The imbalances are cyclical and not structural at the moment.''