Flitch Cutting Growth to 7.75, Indian Infra Breaks to 5.8% , Maruti Bumps, ICICI banks raises rates .25%

The Flitch rating for the BRIC :

Call it a slowdown or a temporary blip in growth momentum! Inflation continues play a spoilsport in India’s growth story.

In its latest report christened as Global Economic Outlook, Fitch Ratings has cut India’s GDP growth target from 8.3% (earlier) to 7.7% in FY12. 

This is what they say:

“India’s economic outlook is likely to remain somewhat clouded by persistent inflationary pressures. India’s economy has clearly hit a soft patch, as GDP grew 7.8% yoy in the first quarter of 2011, down from 8.4% yoy in Q4 2010 and 8.9% yoy in Q3-2010. Private sector investment activity not only appears to be affected by higher borrowing rates but has also been affected by other factors like rising input costs (ie, oil), weaker profitability and increasing bureaucratic red tape. As a consequence, Fitch has revised down its forecast for India’s GDP growth.”

The rating agency believes that the Reserve Bank of India will continue to raise key policy rates to contain inflation in FY12. However, this does not suggest that we are going back to recession like situation.

So, what’s the good news?
The Fitch report says:
“The global economic recovery remains on track, albeit at an uneven pace from quarter to quarter and from country to country. Emerging-market dynamism is still the main driver of the global recovery.”

Fitch has revised down its growth forecasts for the BRIC economies (Brazil, Russia, India, and China) in 2011 from 7.1% to 6.9% and expects world growth to moderate to 3.1% in 2011 compared with 3.2% projected in the previous Global Economic Outlook and to rise to 3.4% in 2012 and 2013.

The India’s Infrastructure Growth Slowed Down to  5.3%

With natural gas and cement showing decline in production, the growth of eight core infrastructure industries slowed down to 5.3 per cent in May against 7.4 per cent a year ago.

The core industries -- crude oil, petroleum refinery products, natural gas, fertilisers, coal, electricity, cement and finished steel -- have a weight of 37.90 per cent in the overall index of industrial production, according to the provisional data released today.

With addition of two sectors -- fertilisers and natural gas -- the number of key infrastructure sectors, picked up separately for measuring performance has now gone to eight.

While six sectors showed positive growth, the pace of expansion declined in the case of refinery products and steel.

Natural gas and cement showed a negative growth of 9.6 per cent and 2.3 per cent, respectively.

However, sectors like crude oil, electricity, fertilisers and coal showed an improvement in growth.