Citigroup cuts FY12 growth forecast to 7.1%

Citigroup cuts FY12 growth forecast to 7.1%

Mumbai: Citigroup slashed its own earlier growth estimates for India for fiscal year 2011-12 amidst a slowing global economy and domestic headwinds, it said in a recent report.

The investment bank expects the third-largest economy in Asia to grow 7.1% in the current fiscal year ending in March, lower than its previous estimate of 7.6%.

Domestic issues including supply-side bottlenecks in the coal and power sectors and lagged impact of monetary tightening are taking a toll on domestic growth, the report said.

The Reserve Bank of India (RBI) expects the country’s economy to grow at 7.6%, lower than its earlier projection of 8%.

Citigroup also cut growth estimate for fiscal year 2012-13 to 7% from 7.5%.

Economy probably grew an annual 6.9% in the quarter through September, at its weakest pace in more than two years, the median forecast from a poll of 22 economists showed.

“Unfortunately, India has less maneuverability relative to the 2008 pullback given its increased fiscal constraints, elevated levels of inflation and government decision-making," the report said.

In October, India’s wholesale price index remained above 9% for the 11th month.

Citigroup said it expects inflation to remain over 9% till the end of 2011 and average in 7.5-8% in 2012.

It also expects the fiscal deficit to widen to between 5.1-5.8% of the gross domestic product (GDP) in fiscal year 2011-12, higher than the targeted 4.6%.