Asian Development Bank (ADB) on Wednesday cut India's economic growth forecast for the current financial year to 5.6%, from its earlier projection of 7.0%, arguing that plunging global demand and a delayed monsoon that will hit agricultural growth would worsen the slowdown in Asia's third largest economy.
"India can start reversing this trend by improving its investment climate and expediting reforms," said ADB chief Economist Changyong Rhee.
Forecasts in ADB's Asian Development Outlook 2012 Update predict India's gross domestic product (GDP) as growing by 5.6% in 2012-13 and 6.7% in 2013-14, a significant drop from ADB's earlier projections of 7% and 7.5%, respectively, for the two years.
"The delayed monsoon, coupled with weaknesses in the agricultural supply chains and rising costs of fertilisers and irrigation, are likely to result in subdued agricultural growth and sustain pressure on food prices," the ADB outlook said.
Industrial output is expected to remain subdued in the current year, with only a modest improvement next year.
The government has made some headway in addressing these challenges recently.