Mumbai: Morgan Stanley cut India's economic growth forecast to 5.1 percent on Monday, the among most private forecasters for the 2012-13 fiscal year, citing a combination of weak demand, low private investment and poor government finances.

The US investment house had previously projected Asia's third largest economy to grow 5.8 in the year ending March. It also reduced its estimate of gross domestic product (GDP) for 2013-14 to 6.1 percent from 6.6 percent.

Notably, economists of Citi, CLSA, and CRISIL have also scaled back India's GDP forecast last month.

Indian economic growth languished near its slowest in three years in the quarter that ended in June but was slightly better than expected at 5.5 percent, showed provisional data released on Friday.

High fiscal deficit, strong wage growth in rural areas and a decline in private investment leading to "stagflation-type environment", Morgan Stanley said in a report. "In the event of continued inaction from the government, we see very high risk of a potential deeper macro stress scenario," Morgan Stanley said, while warning that policy sluggishness could push growth further down to 4.3 percent in the current fiscal year.

In July, India's central bank revised GDP growth projection to 6.5 percent for 2012-13 from 7.3 percent estimated in April.


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