Citi cuts India's economic growth to 6.8%

Global financial major Citigroup has lowered India's economic growth rate projection to 6.8 per cent from 7.2 per cent for this fiscal due to slowdown in consumption and investment.

"Incremental data both on the domestic and global front has been worse than anticipated... At this juncture, (economic) data points to a marked slowdown in consumption and investment," Citi said in a report.

It has also reduced its growth projection for the fiscal year 2009-10 to 5.5 per cent from the earlier 6.6 per cent.

In the last one month, the RBI has infused liquidity of Rs 2,70,000 crore by cutting the cash reserve ratio (the amount banks must keep with the apex lender) by 350 basis points and statutory liquidity ratio by 100 basis points.

RBI has also reduced the short term lending rate (repo) by 150 basis points to 7.5 per cent from 9 per cent last month.

Citi expects that RBI's monetary policy to boost liquidity will continue.

"Further, to boost liquidity, one could expect the possibility of further easing of the capital account norms, NRI deposit scheme, temporary dollar liquidity support from international institutions and some fertiliser/oil bonds becoming eligible for SLR requirements," it added.

Recently, financial services giant Goldman Sachs has revised downwards India's economic growth forecast to 6.7 per cent from 7.5 per cent projected earlier for this fiscal.

Prime Minister Manmohan Singh at G-20 Summit in Washington said: "India's (economic) growth rate is expected to slowdown between 7 per cent and 7.5 per cent in the current financial year."

The GDP for the first quarter of the current fiscal was at 7.9 per cent and the figure for the second quarter is expected later this month.