Reuters New Delhi
The World Bank has sharply lowered its forecast for India’s economic growth to 4.7 percent from 6.1 percent for the current fiscal year, citing a sharp slowdown in manufacturing and investment as well as negative business confidence.
In a report released yesterday, the bank said “high headline inflation, an elevated current account deficit and rising pressure on fiscal balances from the depreciation of the rupee” were factors that could impede the economy’s growth.
“Economic activity is expected to pick up in the second half of 2014, although the speed of economic recovery could be impacted by the country’s present vulnerabilities,” the World Bank said in its India Development Update report.
In a report published six months ago, the bank had expected an acceleration in India’s growth, driven by a pick-up in domestic activity, but that did not materialise.
The latest report forecasts economic growth will pick up to 6.2 percent in the 2014/15 fiscal year, which begins in April.
Last week the International Monetary Fund slashed the growth forecast for Asia’s third-largest economy to 3.8 percent in calendar year 2013 rising to 5.1 percent growth next year.
World Bank expectations of a pick-up in activity later in the year tally with the views of India’s central bank chief, who expects the start-up of billions of dollars worth of stalled resource projects and a good monsoon season to bolster agricultural output and speed up domestic growth.
The Indian economy has slowed sharply from growth of about 8 percent a year between 2002 and 2012 to about 5 percent in 2012/13.
In the previous fiscal year India posted a whopping $88 billion (R876bn) deficit on the current account, the third-largest in the world, raising fears of a balance of payments crisis. The value of the rupee crashed as much as 20 percent between May and August.