Economists predict deeper interest-rate cuts, slow economic growth

Economists have cut their forecasts for India’s economic growth and predicted deeper interest-rate cuts after data showed a sharper-than-expected slump in output.

Goldman Sachs Group and Citigroup lowered their growth projections to 6 per cent for the fiscal year, while Oxford Economics said there’s a risk the expansion could be weaker than that.

GDP rose 5 per cent in the June quarter from a year ago, the slowest pace in six years and lower than all the forecasts in a Bloomberg survey of economists. The weakness was broad-based, with consumption and export growth slowing.

According to the UBS India financial conditions index, the sluggish growth has dampened demand, capital expenditure and export outlook of firms, and the future recovery cycle will be “elongated and below market expectations”. It said growth may have reached a trough -- or a low turning point of a business cycle -- in the June quarter.