In its Asia Pacific Markets Outlook released on Thursday, S&P said India's GDP growth momentum would be dampened in 2007 due to a slowdown in the US economy but would continue to be one of fastest growing Asian economies along with China. It has forecast 8.5 per cent growth for India in 2006.
The slowdown could also be due to factors including continuing macroeconomic stabilisation measures, tightening fiscal stance and a likely reduction in stock market returns compared with 2006, it said.
Though the agency expected slight deceleration in growth rates of China and India, these economies have tended to spring "positive surprises" by clocking a higher growth than projected.
With the oil prices scenario less hostile, S&P maintains a stable outlook for inflation in India at 5-5.5 per cent, same as last year.
In April 2006, S&P had revised India's sovereign credit rating to positive from stable underscoring that India could achieve investment grade ratings if current credit improvement continues, especially on the fiscal front.
India continues to be crucial for regional growth and the Asia Pacific will continue to benefit from three significant sub regional economies in 2007 - China, India and Japan.
