Rating agency, Crisil Ltd has lowered its estimation for India’s gross domestic product (GDP) growth for the current fiscal to 8.1 percent from 8.5 percent.

Crisil attributed increasing inflation and interest rates, together with a declining global growth viewpoint for the downward revision of GDP.

In a declaration, the agency said that it anticipates overall growth to remain strong regardless of the moderation, which is driven by investment.

As the existing inflationary prospects are way beyond the RBI’s comfort zone of 4-5-5%, a cut in key interest rates has been rejected, the report said.

Moreover, the recent reduction of worldwide growth projections has led to make adjustments in the projections for the current fiscal.

The report stated that the inflation would remain high in the next few months because of high commodity prices internationally. But it would come down to 5.5 per cent closer to March 2009, if the monsoon is normal.

On the other hand, if monsoons are below normal and agricultural production stumbles, inflation scenario could get worse.

Mr Dharmakirti Joshi, Principal Economist, Crisil, said, “Good monsoon means good supply of commodities such as rice and wheat, which will help in easing high prices. But the moment we falter on agriculture, the pressure on prices will be huge. In any case, our agri products prices have not shot up as much as the global prices.”

“Edible oil is the only problematic area as 50 per cent of the oil is being imported. But the Government has already cut the duty on import of edible oil,” he added.

He also said that the CRR hike by the RBI is not likely to assist current inflation, but it will help control inflationary expectation.

Ruling out a hike in key interest rates like the repo rate, Mr. Joshi said, “A hike in repo rate will reduce demand and reduce GDP growth. But the economy is already slowing down. Therefore, we do not expect a hike in repo rates unless the RBI believes that there is need to slowdown the growth faster.”

The report has also altered the prediction on fiscal deficit for 2008-09 upwards to 3.9 per cent of GDP, against 2.5 per cent as estimated in the Budget.

Mr Joshi said, “The Budget had not taken into account the impact of the Sixth Pay Commission and the farm loan waiver. Also, the oil and food subsidies are higher. The Government has also reduced the custom and excise duties, due to which revenues from tax collection will fall.”