The country's leading research firm Centre for Monitoring Indian Economy (CMIE) has scaled down its GDP forecast by a notch to 7.8% for this fiscal from the earlier forecast of 7.9%.
"A sharp downward revision in the forecast for the mining index from 4.4% to 3.2%, manufacturing sector from 7.5% to 6.9% and electricity from 9 to 8.7% has led to a further decline in our GDP forecast for this fiscal from 7.9 earlier to 7.8%," 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%. The rating agency Crisil has also revised its growth estimate from 7.7-8% to 7.6%.
"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% and the wholesale price index-based inflation growth has remained riveted to 9.5% 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% 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%. In the first half, the real sales of manufacturing companies grew by about 9%, indicating robust demand for industrial goods, it said.