New Delhi: Citigroup on Sunday said while it expects India's economy to grow by 8.1 percent in 2011-12, a failure of monsoon could bring down the growth rate to as low as 7.6 per cent.

This is far below the 8.5 per cent expansion in the Gross Domestic Product (GDP) achieved during the last fiscal and also below the 8 per cent growth projection for 2011-12 made by the Reserve Bank in its annual monetary policy.

"We expect headline growth to slow to 8.1 per cent in FY12... A less than favourable monsoon could result in agri growth being flat over FY 11 levels and consequently headline
GDP growth coming in at 7.6 per cent," Citi Investment Research and Analysis said in its 'India Macro Flash'.

A sharp recovery in farm output helped the Indian economy register a growth of 8.5 per cent in 2010-11, up from 8 per cent in the previous fiscal.

Agriculture and allied activities expanded by 6.6 per cent in the last fiscal as against a meagre rise of 0.4 per cent in 2009-10.

Citi said it expects agriculture to grow by 3 per cent this fiscal but failure of monsoon could play havoc. "...there are conflicting reports on the outcome of the 2011 monsoons," it said.

The onset of the South-West Monsoon was well on schedule, reaching Kerala by end of May, and so far it has been normal.

The growth story received a slight jolt in January-March quarter of 2010-11 when the economy witnessed a slowdown and registered a growth of only 7.8 per cent, mainly on account of poor performance by the manufacturing sector. This was the slowest GDP growth in five quarters.

Experts have said economic growth is likely to remain slow during next few months on account of inflationary pressure and rate hikes.

Headline inflation has been above 8 per cent since January 2010 and stood at 8.66 per cent in April this year.

RBI has already hiked its key-policy rates nine times since March 2010 to curb demand and tame inflation and more rate hikes are expected during the rest of the fiscal.

Experts had blamed high inflation and the resultant rate hikes as the reason for slowdown in the manufacturing sector.

Rising interest rates and input costs of commodities have led to a slowdown of investments in the manufacturing sector.

Six core infrastructure industries -- crude oil, petroleum refinery products, coal, electricity, cement and finished steel -- reported a growth of mere 5.2 per cent in April as against 7.5 per cent in the year-ago period.

Citi said in the event of a normal monsoon and continuing high domestic consumption, the Indian economy's growth would be 8.1 per cent in 2011-12.

Besides 3 per cent growth in farm output, the industrial and services sectors are expected to grow by 7.6 per cent and 9.5 per cent, respectively according to it.

Industries and services had registered a growth of 7.9 per cent and 9.4 per cent, respectively in 2010-11.

Citi said in the first half, economic growth is likely to be in the range of 7.5-7.8 per cent, with the pace becoming faster in the second half when the GDP growth is expected to be in 8.2-8.5 per cent range.

Regarding rate hike, it said RBI is likely to hike its short-term lending (repo) and borrowing (reverse-repo) rates by a total of 75 basis points during the rest of the financial year.

Agencies