Surveys by the Reserve Bank of India (RBI) and other agencies project low GDP growth and high inflation.
The RBI's Professional Forecasters Survey indicates a downward revision in median growth in 2011-12, primarily due to a possible moderation in growth in agriculture and industry. “Amid high inflation, which poses risks to growth, the available projections for 2011-12 by various agencies offer a mixed picture. Some project a growth rate of 9 per cent, while others project growth of 8 to 8.5 per cent, suggesting a moderation in the growth process,” RBI said.
Surveys on business expectations, conducted by different industrial bodies like Federation of Indian Chambers of Commerce and Industry and National Council of Applied Economic Research, also projected a moderation in growth.
“High and persistent inflation appears to be the single most influential factor affecting business confidence adversely through various channels. These include slackening consumer demand and input cost inflation. Apart from inflation, other factors affecting business confidence include currency risks, global economic instability and geopolitical uncertainty West Asia and North Africa. This may have implications for petroleum prices,” RBI said.
According to RBI's industrial outlook survey, rising input costs may put pressure on profit margins of the Indian industrial sector in the April-June quarter of the current financial year. The survey, which is based on responses from 1,524 companies, said the Indian manufacturing sector is concerned about the slowdown in overall demand, since rising input costs may result in higher selling prices.
“The overall financial situation, working capital finance requirement and the availability of finance deteriorated...There is also a strong perception of increase in the cost of external finance,” RBI said in its report on Macroeconomic and Monetary Developments in 2010-11, which was released today.