IMF Forecasts Lower Growth Rate for India

The International Monetary Fund which, in July 2012, forecast a growth rate of 6.1 per cent for the Indian economy has now revised the forecast to 4.9 per cent: a drop of 1.2 per cent.

IMF HQ, Washington DC

The actual growth rate for the first quarter ended June 2012 was 5.5 per cent which means that the growth rate for the remaining quarters is expected to be less than that in the first quarter.

According to the World Economic Outlook released by the IMF, “India’s activity suffered from waning business confidence amid slow approvals for new projects, sluggish structural reforms, policy rate hikes designed to rein in inflation, and flagging external demand.”

The WEO further said that “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.”

“The downgrade reflects both an expectation that current drags on business sentiment and investment will persist and a weaker external environment,” the WEO report added.

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