Citigroup, CLSA and Goldman Sachs have cut their outlook on India's GDP growth for FY13 to 5.4%, 5.5% and 5.7%, respectively, citing weak southwest monsoon and other lingering headwinds such as sticky inflation, high borrowing costs, widening twin deficits and policy inertia.

Ongoing political gridlock, recent power outages, fragile exports and falling domestic consumption will take a toll on the Indian economy, Citigroup economist Rohini Malkani said in a note. If drought conditions worsen, GDP growth for FY13 could fall to 4.9%, she said.

The Reserve Bank of India (RBI) has scaled back its FY13 GDP projection to 6.5% from the earlier estimate of 7.3%.

CLSA in its report said that it expects growth in the agriculture sector to be stagnant compared with an average growth of 3% in the past few years. "Unfortunately, the scope for counter-cyclical fiscal and monetary support today is almost non-existent," said Rajeev Malik, Economist at CLSA.

On Tuesday, domestic rating agency CRISIL slashed its FY13 GDP growth forecast to 5.5%, just two months after pruning its prediction to 6.5% from 7%. It said that a weakening eurozone outlook along with poor rains contributed to the latest cut.

Goldman Sachs has revised its GDP growth forecast for FY13 to 5.7% from 6.6% earlier, citing a weak monsoon, downbeat investment outlook and continued global uncertainty.

The Wall Street giant added that a weaker monsoon will likely exacerbate the hit to business sentiment, which had already worsened. The latter is largely due to the lack of significant policy reforms, and the challenging global environment. 

A weak monsoon will impact rural consumption demand too, Goldman Sachs said.

“We are also revising our GDP growth forecast for FY14 down to 7% from 7.8% previously, due to a more tepid recovery in both consumption and investment demand, in part due to less monetary easing, and in part due to continued policy stasis,” Goldman Sachs said.