The Centre for Monitoring Indian Economy (CMIE) has revised the economic growth forecast for the current year downwards to 7.9% from the earlier 8%; which is above the majority view of 7.5%.
"The decline in forecast is entirely because of scaling down for the industrial sector," CMIE said in its monthly review, adding that expected 7.9% growth would be lower than the 8.5% growth recorded in FY11.
The decline would be attributed to a sharp fall in the growth in agriculture-from a rather high 6.6% to 2.9% -- and the fall in the growth in industry from 7.9% to 7.5%, the report said.
The Mumbai-based think tank said the industrial sector is expected to slow to 7.5%, lower than earlier forecast of 7.8%. Similarly, the manufacturing sector will grow by 7.5% as against earlier estimate of 8%, and growth forecast for mining sector has been revised from 4.8% to 4.4%.
The decline in the growth expectation of manufacturing sector emanates from sharper-than-expected decline in growth in IIP in July and an expectation that the August IIP would also be weak, it said.
"We do expect a recovery in the second half of the year. However, the slower than expected growth in the first five months warranted the revision in forecast," the report said.
The agency expected a 2.9% increase in the agricultural sector. The rainfall till September was good and the precipitation was 2% above the long period average. Kharif sowing was 3.1% higher than previous season.
Of the earlier indicators of the services sector, the movement of freight on the Indian Railways during the first five months was higher by 6.1%, compared to 2.3% in the corresponding period a year ago. Cargo on the major ports was up by 4.5% against 0.6%.
"We expect the service sector to grow by 9.4% in FY12. This is the same level of growth as in FY11. While we expect the growth in trade, transport, hotels, storage and communication to accelerate, we expect the financial sector to see a fall in the growth rate," report said.
