New Delhi, July 20: The government today lowered its GDP growth projection for 2011-12 to 8.6 per cent from about 9 per cent and added that inflation, currently hovering above 9 per cent, would continue to remain high till December.
The apparent slowdown in headline growth rates on a sequential basis and slowing automobile sales suggest that growth outlook for 2011-12 may be lower, the finance ministry said.
The economy grew 8.3 per cent in the third quarter of the last fiscal and 7.8 per cent in January-March, the lowest in five quarters. It is estimated to have expanded 8.5 per cent in the last fiscal.
Domestic passenger car sales grew at their slowest pace in more than two years in June at 1.62 per cent, as higher fuel prices and rising lending rates kept buyers away.
Industry growth dropped to a nine-month low of 5.6 per cent in May because of the poor performance of manufacturing and mining and a lower offtake of capital goods.
Besides global factors, the slowdown has been attributed to the Reserve Banks tight monetary policy. The central bank has raised its key policy rates 10 times since March 2010 to check inflation.
Headline WPI (wholesale price index) inflation is likely to remain relatively sticky and persistently high between August and December, the ministry said. It said inflation was being driven by seasonal effects and upward movement in crude, manufactured and administered fuel prices.
The government is working with the RBI to take all appropriate steps to reduce inflation to a more comfortable level. While there is no clear-cut definition of tolerance for inflation, we would like to bring it down to 6-6.5 per cent in the near term, it said.
Finance minister Pranab Mukherjee will meet the chiefs of top corporate houses on August 1 to discuss ways to rejuvenate the economy.
Sources said top industry leaders, including Mukesh Ambani, Anil Ambani, Ratan Tata, Kumar Mangalam Birla, Sunil Bharti Mittal, Y.C. Deveshwar and N. R. Narayana Murthy, had been invited.
The finance minister will discuss steps to boost industrial output and promote economic growth, sources said.
The government is also concerned about a slowdown in investments, particularly the inflow of FDI. Measures to attract more foreign and domestic investment are likely to figure prominently in the meeting.