BNP Paribas has sharply cut India’s Gross Domestic Product (GDP) forecast to 3.7% for fiscal 2014 from 5.2% previously. The new forecast, if met, would mark India's lowest growth since fiscal 1992.
The Reserve Bank of India’s (RBI) cash draining measures have increased risks to economic growth at a time when the economy was already slowing sharply over the summer, the investment bank said.
Recent data has been little short of "disastrous", BNP said noting falls in industrial output and PMI indicators.
However, the bank said economy could recover to 5.3% by fiscal 2015 as the weaker rupee should allow a recovery in industrial production and export growth while RBI should be able to reverse quantitative easing and eventually resume monetary easing.