Slowdown may worsen, economists slash growth forecast

Two more institutions joined the growing list of analysts expecting sub-6 per cent growth for India this fiscal, with American banking major Citi and global brokerage CLSA on Wednesday cutting their estimates to 5.4 and 5.5 per cent respectively.

"The stars just don't seem to be aligning for India, with almost all the growth drivers being hit...the government needs to get down to serious business with more action to stem a further deceleration in growth," a note from Citi said, adding that it is scaling down its FY'13 growth estimate to 5.4 per cent from the earlier 6.4 per cent.

The report, authored by Citi India chief economist Rohini Malkani, further said if the drought conditions worsen, growth may slip further to 4.9 per cent.

Meanwhile, the global brokerage firm CLSA also cut its GDP growth estimate to 5.5 per cent from the earlier 6 per cent, stating, "The revised forecast assumes lower growth of zero percent (from a "normal" 3 per cent) for the agriculture and allied sector."

The brokerage's senior economist Rajeev Malik said this may not be a final revision as the monsoon is not yet over.

Last week, the Met department said the monsoons will be below normal by 9-10 per cent of the long period average.

The twin downward revisions come within a day of ratings agency Crisil going public with its estimate of a 5.5 per cent growth, while some others, notably JP Morgan with 5.3 per cent, had earlier forecast lower growth.

In its quarterly policy review on July 31, the Reserve Bank also cut its growth expectations to 6.5 per cent from the earlier 7 per cent, blaming high fiscal deficit, sticky inflation and a possible drought.

In the Union budget in February, the government had targeted a 7.6 per cent growth.

After record growth, GDP for FY12 came down to 6.5 per cent, which was 2 per cent lower than in FY08. That growth was driven down by the global credit crisis following the fall of Lehman Brothers in September 2008.