This comes a day after Finance Minister Pranab Mukherjee said that the growth rate would be around 7.2 per cent in 2011-12.
"Monetary tightening, coupled with a weaker global economy, is likely to weigh on India's growth. This has prompted Fitch to revise down the real GDP growth forecast to 7 per cent for FY'12," Fitch ratings said in a special report on India released today.
Fitch had earlier estimated that India would witness 7.5 per cent economic growth this fiscal.
The Indian economy expanded by 8.5 per cent in 2010-11. While the government had earlier pegged economic growth at 9 per cent for 2011-12, last month it revised the estimate to around 7.2 per cent on account of domestic uncertainties and problems in the euro zone and US.
Terming the current fiscal a "challenging one", Mukherjee had yesterday said the Indian economy's growth rate would be around 7.2 per cent this year.
The economic growth rate slipped to 7.3 per cent during the first half of the current fiscal from 8.6 per cent in the corresponding period a year ago. In the second quarter (July-September), GDP growth slipped to 6.9 per cent, the lowest level in over two years.
While the government had blamed the slowdown on the global downturn, India Inc has complained that the high interest rate regime in the country on account of 13 rate hikes by RBI since March, 2013, is responsible for hindering growth.
Fitch said the country is experiencing a cyclical economic downturn, which has been exacerbated by the tight monetary policy.
"The slowdown has been led by a sharp decline in fixed investment activity despite the robust growth in exports. The contrasting performance suggests that a large part of India's current downturn can be attributed to home-grown factors," Fitch said.
It said that business confidence has suffered from headwinds related to rising costs on account of a rise in interest rates and input prices, besides greater concerns over the investment climate due to incidents of corruption and stalled economic reforms.
The report, however, said the economic growth rate is expected to bounce back to 7.5 per cent in 2012-13 and 8 per cent in 2013-14 as inflation and interest rates decrease.
Earlier this week, the World Bank revised its India growth forecast downward to 6.8 per cent from 8 per cent earlier, citing the tight monetary situation and contagion effect of the global downturn.