The International Monetary Fund (IMF) on Tuesday lowered its projection of India's growth rate to 3.75% in 2013 from 5.7% estimated earlier on account of poor demand and weak manufacturing and services sector performance.
The IMF, in its latest World Economic Outlook report, also said India is among the economies that may require more tightening to address inflation pressure.
"In India, growth in fiscal year 2013 is expected to be around 3.75%, with strong agriculture production offset by lacklustre activity in manufacturing and services, and monetary tightening adversely affecting domestic demand," the IMF said.
"For fiscal year 2014, growth is projected to accelerate somewhat to 5%, helped by an easing of supply bottlenecks and strengthening of exports," according to the report released on the sidelines of the IMF and World Bank meetings.
In April, the IMF estimated India's GDP would expand at 5.7% in 2013 and at 6.2% the following year, indicating the country's declining growth had bottomed out.
In terms of GDP at factor cost, India's growth is estimated to be 5% in fiscal year 2012, at 4.25% in 2013 and at about 5% in 2014, it noted in the latest report. In 2012, India's growth rate was 3.2%, while in 2011 it was 6.3%.
According to the IMF report, in India and Brazil, infrastructure and regulatory bottlenecks slowed output supply in the face of still-strong domestic demand. As a result, external pressures have grown in these economies, it said.
In economies, including India, Brazil and Indonesia, more tightening may be needed to address continued inflation pressure from capacity constraints, which will likely be reinforced by recent currency depreciation, the report said.
Also read : IMF lowers India's growth forecast for 2012-13