UBS cuts India's growth forecast to 7.1% for FY16

Swiss brokerage UBS has revised downwards India's GDP growth projection for the current fiscal to 7.1 percent, from 7.5 percent earlier, on account of weaker external demand prospects. The global financial services firm has also lowered its growth projection for financial year 2016-17 to 7.6 percent from 8.3 percent earlier. India's GDP growth rate slipped to 7 percent in the April-June quarter of 2015-16, from 7.5 percent in the preceding quarter.

The downward revision in growth projection comes despite lower oil prices which were expected to provide a boost to Indian growth. "Weaker external demand prospects and slow progress on balance sheet repair leads us to curtail our growth forecast in spite of cuts in UBS' Brent oil price projections to an average of USD 57.5 in calendar 2016 (from USD 70)," UBS said in a research note. On RBI's policy stance, the report said: "We expect the RBI to cut policy rates 75 bps during the remainder of this fiscal year".

The brokerage said that a combination of below potential growth and balance sheet repair will keep inflation lower than the RBI's targets. RBI, which has lowered the benchmark rate by a combined 75 basis points so far this year in three instalments, will hold its next bi-monthly monetary policy meet on September 29