NEW DELHI: Fast-growing India on Friday blamed the stuttering US recovery and European debt crisis for hitting growth, warning that failure to resolve the problem could further affect expansion.
"The sharply deteriorating global economic environment has had a dampening effect on India," the finance ministry said in its Mid-Year Analysis of the economy in the current financial year.
"Compounded with some domestic factors, the global situation has led to a clear slowdown in the growth rate of the Indian economy during the first half of 2011-12."
The last full-year assessment of the Indian economy saw the government predict growth of 9.0 percent for 2011-12, but that figure has now been revised downwards to about 7.5 percent.
Gross domestic product growth for the first half of the current financial year was 7.3 percent, the latest report said. The economy grew 8.5 percent in the previous financial year.
"We expect some revival next year but the outlook remains mixed," it added in the report, released just after European Union leaders failed to agree a new treaty to tackle the debt crisis and instead forge a separate eurozone pact.
"If Europe slides into a proper recession, with all the attendant financial contagion that will no doubt affect other nations, the entire world economy will slow down and we could also be impacted.
"On the other hand, given that India's fundamentals are strong, if Europe and the United States remain stable, it should be possible for us to get back close to our long-run target of 9 percent."
Finance minister Pranab Mukherjee echoed the assessment in parliament, telling lawmakers: "The economy is in a difficult situation but it does not mean that we should start eating lizards."
India, which was relatively shielded from the last financial crisis in 2008
because of its strong domestic market, has been battling to bring down high inflation running at nearly double figures.
Indian corporates have showed weaker-than-expected second-quarter earnings, as profits have been hit by rising commodity prices and weak global demand for goods and services.
High inflation, rising food and fuel prices have also hit consumer spending, while business leaders blame 13 interest rate rises since March 2010 for hitting investment and growth.
The rupee has meanwhile hit record lows against the US dollar, as overseas investors abandon emerging markets and seek safe haven against global shocks.
New Delhi, however, said that while growth may take a temporary hit, like other emerging markets India's medium-term growth should remain strong.
As a whole, developing economies had shown strong growth compared with developed countries, indicating a shift in the balance of global economic power, it added.
"It is the developing world that is now driving world growth, from largely its own savings and domestic financial resources, and trading and growing with each other," the report said
As a result, emerging markets should serve as an example to developed economies, the government said, warning against lumping together all countries' problems.
"The picture of the world economy has thus turned. While China, India and other large emerging markets are not entirely immune to the ongoing crisis in developed countries, their vulnerabilities are much less," it added.
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