India’s GDP growth is expected to slow to 7.5% in 2011 and 2012 due to the impact of changes in nominal interest rates and the fact that interest rates have risen more rapidly now than in the 2006 cycle, said Devika Mehndiratta of Credit Suisse.
However, full year growth is not expected to fall much below 7% even if interest rates will rise by another 50 basis points as household consumption which comprises 57% of the GDP looks relatively less rate sensitive.