Goldman Sachs, Merrill Lynch downgrade India's growth forecasts

NEW DELHI: A parade of global banks is taking the knife to its estimates of India's economic growth this year, worried that a lethal cocktail of poor macro indicators and an environment of policy drift has cast a darker shadow on the economy than previously thought.
The government may have budgeted for the economy expanding by at least 7.35 per cent during the fiscal year to March 2013, but a raft of independent forecasters have pencilled in numbers lower than 7 per cent, citing reasons ranging from stubborn inflation, high deficits and depreciating currency to industrial slowdown and government inaction.
Economists at Wall Street banks Goldman Sachs and Merrill Lynch were the latest to join the downgrade party for Asia's third-largest economy on Thursday, both cutting their GDP growth forecasts to 6.6 per cent and 6.5 per cent, from 7.2 per cent and 6.8 per cent, respectively, which will make it lower than the 6.7 per cent achieved in 2008-09, the year of the global economic meltdown.
Their downgrades followed Morgan Stanley's sharp downward revision of its projection to 6.8 per cent from 7.5 per cent earlier this week. Its downgrade did not end with the present year. Morgan Stanley now expects growth for 2011-12, the year just gone by, to be 6.5 per cent, which is much lower than the government's advance estimate of 6.9 per cent. The government will release its updated estimates on May 31.
"There is near-consensus that the India story has de-rated, with growth at best likely in the 6-7 per cent range," Citigroup analysts said in a note released on Friday.