National Council for Applied Economic Research on Thursday slashed GDP growth projection to 7.6 per cent from earlier forecast of 7.8 per cent for the current fiscal, even after the government tried hard to ease money supply in the system to tide over the effects of global financial crisis.

"Taking into account changes in the the key parameters of the economy since the previous forecast in July, we have revised our projections for the fiscal 2008-09," the think tank said in the latest quarterly review.

As the recent events have shown, Indian economy cannot be immune to the global developments, whether it is the oil price shocks, food price shocks or the financial market shocks, it said.

Reposing faith in the fundamentals of Indian economy Prime Minister Manmohan Singh last week had said: "Economy will grow by 7.5-8 per cent this fiscal. There is no question of a recession."

Prime Minister's Economic Advisory Council has projected a growth of 7.7 per cent for 2008-09 against the over 9 per cent growth posted in the last fiscal.

During the first quarter of the current fiscal, the economy registered a growth of 7.9 per cent. However, industrial growth crashed to 1.3 per cent in August, raising fears that overall growth may be impacted.

The overall macroeconomic scenario for 2008-09 is one of slower growth as compared with the experience of the last three years, it said, adding the inflation rate is significantly higher than the experience of the past eight years.

The reasons for the deceleration in growth are evident from the slowdown in private consumption expenditure and the drop in overall investment spending, it said. 

NCAER said, there has also been a steady erosion in the growth of gross fixed capital formation since second quarter of 2007-08 and in private consumption expenditure since third quarter of 2007-08.

The rising inflation and volatility in financial markets have translated into subdued growth in private expenditure, it said.

The report noted that the period since June 2008 has been marked by large shocks to the economy. The oil price shock and the global financial crisis have continued to test the fundamentals of the economy which formed the basis of the 9 per cent growth in the past three years.

Industrial growth during the first four months of the current fiscal year dropped sharply to 5.7 per cent compared with 9.7 per cent in the same period a year ago, it said.

Industry is expected to grow at 8.2 per cent against the earlier forecast of 8.4 per cent.

Services sector growth projection has also been cut to 8.9 per cent as compared with 9.1 per cent. Even the farm sector is expected to slow down to 2.3 per cent.

The inter-linkages between agriculture, industry and services are not as clear as before.

Even when agriculture fared poorly, industry and services showed high rates of growth, it said.

On rate of price rise, NCAER report projected average inflation of 7.8 per cent for the whole year as compared with 7.9 per cent announced earlier.

Inflation for the week ended October 4 stood at 11.44 per cent well above seven per cent mark for this year.

• Global meltdown: Complete coverage