India economic growth seen at 7.6 pct in FY09 - NCAER

NEW DELHI Oct 16 (Reuters) - India's economic growth may slow to 7.6 percent in FY09 from 9 percent a year earlier as high inflation, slack consumer demand and the global financial market crisis take their toll, an economic think-tank said on Thursday.

The National Council for Applied Economic Research (NCAER) said it was cutting its growth estimate for the second time this year to 7.6 percent, from 7.8 percent predicted in August and 8.5-8.8 percent in May.

NCAER's latest forecast is lower than 7.7 percent forecast of the Prime Minister's economic advisory council and 8 percent estimated by the central bank.

"The impact of two recent external shocks on the economy -- high crude oil prices and the financial market crisis, implies a higher inflation rate and slower growth....The intensity of the shocks has grown," NCAER said in a report.

"The impact of the financial market crisis on the supply of credit and liquidity has been more intense than anticipated."

NCAER expects industrial growth at 8.2 percent in FY09, slower than 8.6 percent in the last fiscal year, while services may expand 8.9 percent in FY09, it added.

Farm output is expected to be higher by 2.3 percent in FY09 even with a normal monsoon, it said. "The overall monsoon rainfall has been close to the long-term average but western and southern regions experienced less than normal rainfall in 2008-09."

NCAER said it expects inflation to average 7.8 percent during FY09 compared with 4.4 percent of last fiscal year. "The duration of the high rates has been longer than expected," it added.

Fiscal deficit is seen widening to 3.6 percent of GDP in FY09, higher than government's target of 2.5 percent.

(Reporting by Rajkumar Ray, Editing by Ramya Venugopal)