The Centre for Monitoring Indian Economy (CMIE) has revised its economic growth forecast for the current fiscal downward to 7.9 % from its earlier estimate of 8 %.
"The decline in the forecast is entirely because of scaling down for the industrial sector," the CMIE said in its monthly review, adding that the estimated 7.9 % growth would be lower than the 8.5 % expansion recorded in FY'11.
The reduced forecast can also be attributed to a likely sharp fall in growth of the agriculture sector from a rather high 6.6 % to 2.9 % and a projected slowdown in industrial growth from 7.9 % to 7.5 %, the report said.
The Mumbai-based think-tank said growth of the industrial sector is expected to slow to 7.5 %, lower than its earlier forecast of 7.8 %.
Similarly, the manufacturing sector is expected to grow by 7.5 %, as against its earlier estimate of 8 %. The growth forecast for the mining sector has been revised downward from 4.8 % to 4.4 %.
The decline in the growth expectations of the manufacturing sector emanate from a sharper-than-expected decline in index of industrial production (IIP) growth in July and expectations that the August IIP will 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.
With respect to its projection of 2.9 % growth in the agricultural sector, the CMIE said rainfall till September was good and precipitation was 2 % above the long period average. Kharif sowing was 3.1 % higher than the previous season as well.
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 throughput at major ports was up by 4.5 %, as against 0.6 %.
"We expect the service sector to grow by 9.4 % in FY'12. This is the same level of growth as in FY'11. 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," the report said.