Citigroup downgrades India's eco growth rate

Global financial major Citigroup has lowered India's economic growth rate projection to 6.8 per cent from 7.2 percent 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 percent from the earlier 6.6 percent.

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 percent from 9 percent 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 percent 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 percent and 7.5 percent in the current financial year."

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