Mumbai: Kotak Mahindra Bank revised down India’s growth projection for the current year ending March 2009 to 6.5% from 6.8% earlier due to capital outflows, it said in a weekly note.
It also revised its growth forecast for the next fiscal year to 5.5% from an earlier forecast of 5.8%.
The government forecast the economy to grow at 7.1% in the current fiscal year ending March, while it sees the economy to grow at 7% in the next fiscal year.
Downside risks to growth could be limited to a certain extent due to expected consumption push coming in from farm loan waiver, salary hikes for civil servants and dearness allowance to federal employees, economist Indranil Pan told Reuters.
The current rate cutting cycle is not yet over, the Reserve Bank of India (RBI) might not be providing the market with the next round of policy easing immediately as it is likely to wait and watch for the transmission of previous policy reductions to take effect.
The future trend for bonds could be determined by the cut-off at the auction based open market operation purchases of bonds by the RBI on 5 March.
Headline inflation is likely to come down close to 3% next week as a small cut in air turbine fuel prices comes into effect, Pan said.