A major worry, Crisil said, is the sharp fall in nominal growth to 6.1 per cent in Q2 - the lowest in the new GDP series. "We expect nominal GDP this fiscal to average 8.9 per cent as against the budget estimate of 12 per cent. This will impact tax collection and fiscal ratios."
Crisil's sharp downward revision of growth outlook comes just ahead of the RBI's three day long monetary policy committee (MPC) meeting, set to start from Tuesday. It is widely expected to deliver a rate cut in order to support growth.
It, however, added that growth may recover mildly to 5.5 per cent from 4.8 per cent in the first half, with support from monetary policy, agriculture, a mild pick-up in government spending, and a weak base effect.
"There is also an atypical brake at work... the clean-up of the financial sector happening after almost 20 years. That can stretch the slowdown, particularly because policy space for counter-cyclical action is limited with tax revenue way behind target," Crisil noted.
"Recent data shows that government has decided to speed up spending to support the economy. It now becomes important to fast-track non-tax revenue generation through divestments and asset monetisation to keep the fiscal deficit under check. Monetary policy transmission has also been weak, and financial sector stress and risk aversion have adversely impacted credit flow.
( With inputs from IANS )