US investment bank Morgan Stanley on Monday slashed its growth forecast for the Indian economy for the current fiscal year as well as next citing rapidly deteriorating near term growth outlook for Asia's third biggest economy.

The bank said that India is headed for its worst period of growth since the global credit crisis and support from all major growth drivers for the economy will wane at the same time.

Morgan Stanley cut gross domestic product estimates for fiscal year ending March 2012 to 7.2% from 7.7% and that of 2012-13 to 8% from 8.5%.

Late July, Standard Chartered Bank also pared its FY12 growth forecast to 7.7% from 8.1% previously.

The central bank's estimate for the current fiscal stands at a more optimistic 8%.

India's growth, which was holding up well until the quarter ended March, is showing clear signs of slowdown over last 3 to 4 months, with the car sales, two wheeler sales, retail sales, investment and construction spending appear to be moderating, the report authored by analysts Chetan Ahya and Upasana Chachra said.

It cited a host of factors including persistently high inflation, higher cost of capital, cut in the ratio of fiscal spending to GDP, a weak global capital markets environment, and slow pace of investment will cause a further slowdown in growth.

Indian factory growth fell for the third month in a row in July as a long series of interest rate hikes and faltering global demand weighed on new orders and output growth, a survey of business activity showed on Monday.

(Sourced from FE)