The International Monetary Fund (IMF) has lowered India's economic growth forecast by 1% to 5-6% for 2012-13. According to its latest World Economic Outlook report, "Growth in India is projected to average 5-6% in 2012–13, more than one percentage point lower than in the April 2012 WEO (World Economic Outlook)."
"The downgrade reflects both an expectation that current drags on business sentiment and investment will persist and a weaker external environment," the report added.
Released in Tokyo ahead of the IMF-World Bank 2012 Annual Meetings, the report said that the growth has weakened in the first half of current year due to deteriorating business sentiment and stalled investment due to governance issues.
"In India, growth weakened more than expected in the first half of 2012, an outcome of stalled investment caused by governance issues and red tape, and a deterioration in business sentiment against the backdrop of a rising current account deficit and the recent rupee depreciation,” it said.
The report presented a gloomier picture of the global economy than a few months ago, saying prospects have deteriorated further and risks increased. The IMF's forecast for global growth was marked down to 3.3% this year and 3.6% for 2013.
The multilateral agency said advanced economies are projected to grow by 1.3% this year, compared with 1.6% last year and 3% in 2010, with public spending cutbacks and the still-weak financial system weighing on prospects