Conforming to forecast of PM's Economic Advisory Council and other economists, economic think-tank National Council of Applied Economic Research (NCAER) has also projected moderation in economic growth at 7.8 per cent for the current fiscal, from the earlier estimate of 8.8 per cent.

The one per cent downward revision is attributed to recent hike in interest rates, rising inflation and crude oil prices and reduction in the private investment by about Rs 60,000 crore.

Besides, increase in central government subsidies by Rs 20,000 crore and reduction in the world output by one per cent to four per cent in 2008 would have bearing on the growth, NCAER said in its latest monthly report.

Though fiscal deficit is not projected to rise much above three per cent, the Current Account Deficit is projected to grow to 6.5 per cent of GDP, it said.

Assigning the reasons for high CAD, the report said, a combination of higher crude oil prices and lower global demand has widened the projected current account imbalance.

Notably, Indian economy witnessed a growth of 9.1 per cent during 2007-08.

The decline in growth is lower in all the main sectors of the economy, it said, adding, industry is expected to grow at 8.4 per cent, against the previous forecast of 9.4 per cent while services would expand by 9.1 per cent, compared to 10.5 per cent.

However, the growth in the agriculture sector has been kept unchanged at 2.5 per cent.

On inflation, the NCAER report said that the Wholesale Price-based inflation is likely to be at 7.9 per cent during the fiscal, against the earlier projection of 5.2 per cent. For the week ended August 9, inflation stood at 12.63 per cent, against 12.44 per cent in the previous week.

According to analysts, the implementation of Sixth Pay Commission would further increase inflation as money supply would go up.

It is therefore, widely expected that Reserve Bank would squeeze money supply by increasing Cash Reserve Ratio (the mandatory cash deposit that banks have to keep with the central bank) to tame inflation.

On Friday, financial services major Citigroup also revised GDP growth downward to 7.7 per cent from 9.1 per cent projected earlier.

Citi attributed the decline in the GDP growth to a fallout of weak global trend, continuing credit crisis, fiscal profligacy and politics.

However, it said, the factors that might be growth positive are lower oil prices, and faster structural reforms.