More economists cut India growth forecasts

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More economists slashed their economic forecasts for India with Citigroup and CLSA cutting their outlooks for growth to 5.4 per cent and 5.5 per cent respectively in the fiscal year ending March, with a weak summer monsoon adding to economic headwinds.

Citigroup said a policy gridlock, recent power outages, weaker exports and falling domestic consumption will take a toll on Asia's third-largest economy.

Economist Rohini Malkani said in a note that if drought conditions worsen, growth could fall to 4.9 per cent.

The Reserve Bank of India has already cut its GDP projection to 6.5 per cent for 2012-13 from the earlier estimate of 7.3 per cent.

CLSA said it expected the farm sector to be stagnant compared with an average growth of 3 per cent in previous years.

"Unfortunately, the scope for counter-cyclical fiscal and monetary support today is almost non-existent," wrote Rajeev Malik, economist at CLSA.

The RBI has been reiterating concerns over rising food prices alongside a high subsidy bill, which could worsen the fiscal deficit.

The summer drought has put a question mark over the government's ability to raise fuel prices.

On Tuesday, Indian rating agency CRISIL slashed its growth forecast to 5.5 per cent for the fiscal year ending March, just two months after pruning its projection to 6.5 per cent from 7 per cent.

It said a weakening euro outlook along with poor rains contributed to the latest cut.