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Mumbai, Dec 14: Estimating India's real GDP growth in 2006 at 8.5 per cent, international credits rating agency Standard&Poor's has forecast a mild slowdown in growth at 7.5 to 8 per cent in 2007 due to multiple factors such as continuing macroeconomic stabilization measures, tightening fiscal stance, and a likely reduction in stock market returns compared with 2006.

It revised India's sovereign credit rating to positive from stable in April 2006, stating that if current credit improvements continue, especially on the fiscal front, India could achieve investment grade ratings.

'' The country's strong growth prospects remain key to credit strength, while fiscal inflexibility its key credit weakness,'' said Ping Chew, managing director of corporate and government ratings, Asia. '' Overall, while the growth trajectory of the economy is expected to continue, India's public finance is particularly vulnerable to any secular decline in growth rates and increase in interest rates. Concerns over a strong pick-up in budget expenditure, a result of the front-loading of planned expenditure in the first few months of fiscal 2006-07, have abated somewhat, although this will remain a key focus.'' Ping said, ''Reform efforts also remain at risk from a policy environment that is encumbered by an entrenched bureaucracy, coalition politics, and a fragmented administration''.

But the agency said ''Overall credit quality of the Indian corporate sector is likely to remain sound in 2007''.

''Indian corporates may face pressure from higher debt for funding capacity expansions, potentially weakening operating margins, and from rising interest rates. But improvements in their financial profiles from strong sales growth and cash flow in the past two to three years will mitigate these adverse trends and lend stability to their credit profiles,'' said Anshukant Taneja, director and team leader of corporate ratings, Asia ex-Greater China.

UNI