S&P cuts India's growth forecast to 5.5 pc

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SME Times News Bureau | 24 Sep, 2012
Global ratings agency Standard & Poor's Monday said it has lowered India's economic growth forecast by one percentage point to 5.5 percent for 2012 due to deficient rainfall and lingering crisis in the Eurozone and weak recovery in the US.

"The lack of monsoon rains has affected India, for which agriculture still forms a substantial part of the economy. Additionally, the more cautious investor sentiment globally has seen potential investors become more critical of India's policy and infrastructure shortcomings," S&P said.

The Indian economy grew at a sluggish 5.5 percent in April-June 2012 period as compared to 8 percent in the corresponding quarter of previous year, according to the latest government data.

In the first quarter of the current calendar year, India's GDP growth had slumped to nine year low of 5.3 percent.

The S&P forecasts show that economic growth situation would remain sluggish in the second half of the year as well.

In a report titled "Asia-Pacific feels the pressure of ongoing global economic uncertainty" the ratings agency cut gross domestic product (GDP) growth forecast for all major Asian economies.

The agency has lowered real GDP growth forecasts for the calendar year 2012 by about half a percentage point for China to 7.5 percent, Japan to 2 percent, South Korea to 2.5 percent, Singapore to 2.1 percent and Taiwan to 1.9 percent.

GDP growth forecast for Hong Kong is revised downward by about one percentage point to 1.8 percent, while for Australia it is lowered marginally to 3 percent from 3.2 percent.

"Any worsening of the economic conditions in the Eurozone will increase contagion risk for Asia Pacific, given the region's -- particularly the open economies' -- sensitivity to capital flows and trade," S&P credit analyst Andrew Palmer said in the report.

S&P said credit conditions for the countries in Asia Pacific remained mixed.

"We have factored our base case GDP scenarios into our current ratings on and issues in the region. At this stage, the short-term impact of the greater-than-anticipated slowdown on credit ratings is likely to be limited to the more leveraged entities," the ratings agency said.