Mumbai, May 14: The new government that will assume office once the electoral results are declared on Saturday will have to accept one grim fact: the go-go days of 9 per cent economic growth between 2004 and 2008 are well and truly over.

Professional forecasters surveyed by the Reserve Bank of India expect the Indian economy to grow at the rate of 7 per cent a year over the next five years — which is down from the 7.7 per cent forecast in an earlier survey.

Over the next 10 years, the gross domestic product (GDP) is expected to grow at 7.5 per cent, which is down from the earlier forecast of 8.8 per cent.

Inflation has tumbled to 0.48 per cent at present but the forecasters expect it to hover at 5 per cent over the next five years. Over a 10-year horizon, inflation is expected to settle at around 4.5 per cent.

The forecast is based on responses from 17 professional forecasters to a questionnaire sent out by the central bank.

The RBI has conducted the survey every quarter since September 2007. It does not reflect its views.

The survey said the growth forecast for 2009-10 had been trimmed to 5.7 per cent from 6 per cent earlier. GDP growth in 2008-09 has been projected at 6.6 per cent, down from 6.8 per cent earlier. In its monetary policy review in April, the RBI had estimated growth in 2009-10 at 6 per cent.

At a review in April, where it cut its main lending rate by 25 basis points to 4.75 per cent, the RBI had estimated growth in 2009-10 at 6 per cent.

The survey expects the RBI to cut its main lending rate — the repo — to 4.5 per cent. In April, the RBI cut the repo rate by 25 basis points to 4.75 per cent. The central bank’s main borrowing rate, or the reverse repo rate, is expected to drop to 3 per cent by the end of the current financial year. The reverse repo rate now stands at 3.25 per cent.

The forecasters expected the central bank to trim the repo rate and the cash reserve ratio (CRR) for banks in the first quarter of the current financial year.

The CRR is the proportion of deposits that banks must park with the RBI. It currently stands at 5 per cent.

The first quarter review of the monetary policy is due on July 28.

The survey expects wholesale price inflation on a year-on-year basis in the first quarter of 2009-10 to fall to minus 1.4 per cent from an earlier estimate of 2.4 per cent.

The central government’s fiscal deficit is expected to widen to 6.2 per cent of GDP in 2008-09, whereas the combined gross fiscal deficit is likely to come in at 9.8 per cent, the survey showed.

Both these figures have been revised upwards from 5 per cent and 8 per cent, respectively, in the last survey.

Fitch forecast

Rating agency Fitch today said it expected India’s growth to slow down to about 5 per cent in the current fiscal because of the recession in the advanced economies and the reduction in capital flows.