New Delhi: Noting that India's monetary and fiscal policies are at loggerheads, global financial services firm Nomura has lowered the country's growth forecast for this fiscal to 5.8 percent, from 6.7 percent earlier.

"Given weaker initial conditions and limited scope for a major stimulus, we revise down our GDP growth forecast to 5.8 percent for FY13 (year ending March 2013) from 6.7 percent," it said in a report.

Nomura has also cut its India GDP forecast for 2013-14 to 6.6 percent form the earlier 6.9 percent.

The government is aiming at GDP growth rate of about 7.6 percent this fiscal. India's economic growth rate slowed to 6.5 percent in 2011-12 from 8.4 percent in the previous two fiscals.

The global firm said India's monetary and fiscal policies are at "loggerheads" and in "deadlock".

It further said India government policies remain inflationary, reducing the scope for rate cuts, hurting growth and in turn exacerbating the fiscal deficit.

"In our view, the longer the economy stays in the current deadlock, the bigger the policy shock that will be required to get out," Nomura added.

On wholesale price based inflation, Nomura said that it has revised upward its average forecast to 7.6 percent for the current fiscal from earlier 7.1 percent due to higher food prices and rupee depreciation.

It has also revised upward its fiscal deficit forecast for India to 5.8 percent of GDP in the current fiscal from 5.2 percent. Government aims to bring down the fiscal deficit to 5.1 percent in 2012-13 from 5.76 percent in the previous fiscal.

Nomura's observations comes against the backdrop of global agency Moody's retained its stable rating outlook for India.

(Agencies)

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