World Bank cuts India growth for next fiscal to 4.7%

New Delhi: The World Bank 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 on Wednesday, 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 country’s growth.

“Economic activity is expected to pick up in the second half of FY2014, 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.

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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 further to 6.2 percent in the 2014/15 fiscal year that begins next April.

Last week, the International Monetary Fund (IMF) slashed the growth forecast for Asia’s third-largest economy to 3.8 percent in calendar 2013 year and forecast 5.1 percent growth for 2014.

The World Bank’s expectation of a pick-up later in the year tallies 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 domestic growth.

The Indian economy has slowed sharply from growth of around 8 percent per year between 2002 and 2012 to about 5 percent in 2012/13.

In the last fiscal year India posted a whopping $88 billion deficit on the current account, the third largest in the world, raising fears of a balance of payments crisis. The rupee crashed as much as 20 percent between May and August.

Reuters