The Confederation of Indian Industry (CII) is sticking to its June projection of India clocking around eight per cent growth in 2006-07, less than the economic growth of 8.4 per cent registered in the last fiscal.
The estimate of lower growth, the leading industry lobby states in its latest State of the Economy (SOE) report, is based on expectations of higher inflationary pressures and rising interest rates.
"Oil price hike and fear of high inflation coupled with increasing interest rates are expected to affect the performance of manufacturing and services sectors adversely and this is expected to bring down the growth rate slightly for the current fiscal," the CII states in its report released on Sunday.
In its June issue of SOE, the CII had observed that the economy in the current fiscal might clock a growth of less than 8.4 per cent reached in the last fiscal.
With the continuing prospects of inflationary pressure and tightening interest rates, the industry lobby has not upwardly revised its projections.
"As there are no significant developments in economic conditions since then, CII stays with the projection made earlier," the report states.
The estimates are that during the current fiscal agriculture would clock 3 per cent growth while industry will register 8.5 per cent growth and services 9.6 per cent, "with overall GDP growth forecast at 8 per cent".
The report points out that the agriculture, industry and services contributed to the total economic growth last year by 9.0 per cent, 27 per cent and 64 per cent respectively.
For the April-June quarter of 2006-07, the CII expects the GDP growth at around the 8 per cent mark.
In comparison, China scored 11.3 per cent growth in GDP in the first quarter boosted by the growth in imports and exports, which created favourable conditions for further economic and trade cooperation.
In a comparative study, the report points out the most major industrial countries have witnessed inflation on an upswing mainly on account of global oil price increases.
In the first quarter, the inflation index in China showed a rising trend and stood at 1.5 per cent in June. In India, inflation measured by wholesale price index rose from 4.1 per cent in March-end to 4.7 per cent in the beginning of July.
With the global oil prices continuing to maintain volatile trend, the CII report expects continued risk to the growth and inflationary performance.