Think-tank National council of Applied Economic Research (NCAER) and leading Industry body Confederation of Indian Industry (CII) expects India's GDP growth to slow down to 8.3 and 8.5 per cent respectively of its GDP in 2007-08 from 9.2 per cent in 2006-07.

The NCAER and CII are unanimous in pointing to the Reserve Bank's sustained measures to tighten money supply, coupled with supply shortfalls, as the major factor behind slower growth in the year begin to impact industry.

NCAER says all three segments -- farm, industry and services -- would see lower growth this fiscal, with farm output under normal monsoon conditions projected to grow 2.6 per cent, slightly lower than 2.7 per cent estimated for 2006-07.

CII, on the other hand, is more positive on agriculture, which it sees as growing higher at 3 per cent compared with 2.7 per cent. It expects industrial output to expand by 9.3 per cent to NCAER's 8.7 per cent during 2007-08, down from the 10 per cent estimated for 2006-07.

Both bodies expect services to grow at 9.9 per cent, below the 11.2 per cent in the year ended March 2007.

CII says factors such as the global moderation of growth, inflation and falling demand as a result of spiralling interest rates, appreciating rupee and significant supply shortages in global and Indian economy may restrict GDP growth in the current year to 8.5 per cent.

There are already signals of demand slowdown in sectors like automotive, retail banking, etc, as a result of the rate squeeze and growth forecasts have accounted for this trend.

The strongest factor contributing to the slowdown would be repeated monetary intervention, says CII, by the central bank to reign in inflation - RBI has raised cash reserve ratio for banks three times since December to suck out liquidity and in 2007 increased its main lending rate by 50 basis points, taking short-term lending rates to 7.75 per cent.

NCAER expects inflation to average 5.3 per cent in 2007-08. In the year to March 2007, the wholesale price index rose 5.74 percent. It also expects fiscal deficit to decline to 3.2 per cent of gross domestic product in 2007-08 from 3.7 per cent targeted in 2006-07, it said.

NCAER expects a current account surplus of 1.3 per cent of GDP this fiscal on the strength of robust services exports. India had a current account deficit estimated at 1.7 percent of the GDP in the last fiscal.