Noting that India's monetary and
fiscal policies are at loggerheads, global financial services firm Nomura has lowered the country's growth forecast for 2012-13 to 5.8 per cent, from 6.7 per cent earlier.
Nomura has also cut its India GDP forecast for 2013-14 to 6.6 per cent form the earlier 6.9 per cent.
"Given weaker initial conditions and
limited scope for a major stimulus, we revise down our GDP growth forecast to 5.8 per cent for FY13 (year ending March 2013) from 6.7 per cent," it said in a report.
The government is aiming at GDP growth rate of about 7.6 per cent this financial year. India's economic growth rate slowed to 6.5 per cent in 2011-12 from 8.4 per cent in the previous two financial years.
The global firm said
India's monetary and fiscal policies are at "loggerheads" and in "deadlock".
It further said India government policies remain inflationary, reducing the scope for rate cuts, hurting growth and in turn exacerbating the fiscal deficit.
"In our view, the longer the economy stays in the current deadlock, the bigger the policy shock that will be required to get out," Nomura added.
On wholesale price based inflation, Nomura said that it has revised upward its average forecast to 7.6 per cent for the current fiscal from earlier 7.1 per cent due to higher food prices and rupee depreciation.
It has also revised upward its fiscal deficit forecast for India to 5.8 per cent of GDP in the current fiscal from 5.2 per cent. Government aims to bring down the fiscal deficit to 5.1 per cent in 2012-13 from 5.76 per cent in the previous fiscal.
Nomura's observations comes against the backdrop of global agency Moody's retained its stable rating outlook for India.
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