Rating agency Standard & Poor’s has slashed India’s growth forecast to 5.5% from 6.5%. This is sharply lower than the 6.5% estimated by the Reserve Bank of India and multilateral agencies such as World Bank and ADB but higher than that of investment banks such as Morgan Stanley which has forecast a 5.1% growth.
“The lack of monsoon rains has affected India, where agriculture still forms a substantial part of the economy. Additionally, the more cautious investor sentiment globally has seen potential investors become critical of India’s policy and infrastructure shortcomings. The latter was recently highlighted by the power outage in early August that affected 20 of India’s 28 states,” S&P said in a statement.
The lowering of growth estimates is part of a review of Asian economies which has resulted in half percentage point cut in estimates for China to 7.5%; Japan to 2.0%; Korea to 2.5%; Singapore to 2.1%; and Taiwan to 1.9%. India’s slower growth is a combined result of a 15% deficit in rainfall for June-September and the worsening Eurozone crisis.
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