India's shock GDP decline promotes growth, interest rate cuts by Bloomberg

(Bloomberg) – Economists cut their forecasts for India's economic growth and predicted deeper interest rates after data showed a steep decline in projected output.

Goldman Sachs Group Inc. (NYSE :). and Citigroup Inc (NYSE :). lowered growth forecasts to 6% for the fiscal year through March 2020, while Oxford Economics Ltd. said that there is a risk that the expansion may be weaker than that.

Late Friday data showed that gross domestic product rose 5% in the June quarter from a year ago, the slowest pace of six years and lower than all forecasts in a Bloomberg survey of economists. The weakness was broadly based, while consumption and export growth slowed while investment remained subdued.

The decline will put the onus on the Reserve of India to continue cutting interest rates by 1[ads1]10 basis points to ease already this year, economists said.

The government – which maintains its 7% growth forecast for the financial year – has announced in recent days a number of steps to improve India's long-term growth, without providing any immediate support. It will merge state banks to help stimulate credit growth, facilitate foreign investment rules and make concessions on vehicle purchases.

Here's a look at the new projections from economists: