World Bank cuts growth forecast to 6.9%

The Indian economy would grow at 6.9% in 2012-13, the World Bank projected on Tuesday, cautioning that delicate public finances, high prices and policy standstill will weigh heavily on growth prospects. HT reports.

The Indian economy would grow at 6.9% in 2012-13, the World Bank projected on Tuesday, cautioning that delicate public finances, high prices and policy standstill will weigh heavily on growth prospects.

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The latest forecast, detailed in a report titled Global Economic Prospects (GEP), was sharply lower than the 7.5% projected by the Bank earlier.

It was, however, marginally higher than the 6.5% growth in India’s gross domestic product (GDP) in 2012-13, the lowest in 9-years.

“Among South Asia, growth in India was particularly weak due to monetary policy, stalled reforms, and electricity shortages which, along with fiscal, inflation concerns, cut into investment activity,” it said.

Economic gowth will subsequently pick up, the World Bank said, projecting that India's GDP would grow 7.2% and 7.4% in 2013-14 and 2014-15, respectively. “Policy uncertainties, fiscal deficits, entrenched inflation, and infrastructure gaps will continue to weigh negatively on investment activity,” the report warned.

It also warned that developing countries should prepare for a long period of volatility in the global economy by reworking medium-term development strategies, while preparing for tougher times.

Besides, any further deterioration in the economic situation of Europe will have cascading effects across all countries.

“Should the situation in Europe deteriorate sharply no developing region would be spared. Even the world’s poorest countries will also feel the fall out — especially countries that are heavily reliant on remittances, tourism or commodity exports or that have high-levels of short-term debt,” it said.