India govt panel cuts growth forecast to 8.5%

Chief Regulatory Officer at CSE Renuke Wijayawardhane presenting the listing certificate to Executive Chairperson at Renuka Hotels Shibani Thambiayah

NEW DELHI, May 6, 2011 (AFP) – The top economic adviser to India’s prime minister has cut his estimate for economic growth in the current fiscal year by half a percentage point to 8.5 percent, citing inflationary pressures. The Indian government has targeted 9.0 percent growth for the year to March 31, 2012, but the battle against stubbornly high inflation is threatening to derail those plans.

The “persistence of high inflation is inimical to medium-term growth,” C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said in an interview with Dow Jones Newswires published Friday.

His lower growth forecast came after the central bank earlier in the week projected even slower expansion of 8.0 percent for fiscal 2011-12.

Hiking interest rates for the ninth time in 15 months, by a bigger than expected 50 basis points, the bank said short-term economic growth may have to be sacrificed in the fight against inflation.

Inflation in India has been at uncomfortably high levels for well over a year now, and is currently running at around 9.0 percent.

Controlling prices is an overriding priority for Prime Minister Manmohan Singh’s Congress-led government, with poorer households — th