International Monetary Fund (IMF) has lowered India's growth forecast by 0.7% to 6.1% for 2012 -- the steepest cut for any nation -- in view of deteriorating global economic situation.
The IMF, in its update of the World Economic Outlook, has also cut India's growth projection for 2013 by a similar margin to 6.5%.
"In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness," it said while updating its April Economic Outlook.
The IMF has reduced the global growth forecast for 2012 to 3.5% from 3.6%. For 2013, the growth forecast has been lowered to 3.9%, from 4.1%, indicating that there are harder times ahead for economies.
"Downside risks to this weaker global outlook continue to loom large," it said, adding that the most immediate risk is "still that delayed or insufficient policy action will further escalate the euro area crisis."
As far as the emerging and developing economies are concerned, the growth projection for 2012 has been estimated at 5.6%, 0.1% below the earlier forecast made three months ago.
"Growth momentum has also slowed in various emerging market economies, notably Brazil, China, and India. This partly reflects a weaker external environment, but domestic demand has also decelerated sharply in response to capacity constraints and policy tightening over the past year," IMF said.
The Asian Development Bank (ADB) had last week lowered the growth forecast for India to 6.5% for the current fiscal, from the earlier 7%. According to official projections, Indian economy is expected to grow at 7.6% (+/- 0.25%) in the current fiscal (April-March).
India's economic growth fell to a nine-year low of 6.5% in 2011-12 fiscal. Last month, the World Bank had projected Indian economy to grow at 6.9% in the current fiscal.
The IMF said many emerging market economies have been hit by increases in investor risk aversion and perceived growth uncertainty, which have led not only to equity price declines, but also to capital outflows and currency depreciation.
For the emerging and developing economies, IMF said, "Policymakers should adjust policies, given spillovers from weaker advanced economy prospects and slowing export growth and volatile capital flows."
The IMF cut its growth forecast for the crisis-hit Euro zone to 0.7% in 2013. It, however, maintained that the the Euro zone would witness a 0.3% contraction in GDP in 2012.
"The situation in the Euro area crisis economies will likely remain precarious until all policy action needed for a resolution of the crisis has been taken," IMF said.
The Washington-based multilateral lender has also trimmed the growth forecast of US by 0.1% for both 2012 and 2013.
The IMF expects the US economy to expand by 2% and 2.3% in 2012 and 2013, respectively.