IMF pegs India’s 2012 growth lower at 4.9%

Global institutions continue to see glum growth prospects for India this year. After rating agencies Moody's and Standard & Poor's and Standard Chartered Bank, the International Monetary Fund, in a report released today, forecast that India's GDP growth will shrink to a mere 4.9 per cent this year.

A new raft of reforms should help the growth rate to bounce back in 2013, the IMF said in its latest World Economic Outlook survey. But the organisation lowered its forecast for 2012 by one percentage point to 4.9 per cent, citing "an expectation that current drags on business sentiment and investment will persist".

Although India recorded growth of 6.8 per cent in 2011, it has dipped more recently to around 5.5 per cent, its lowest in three years.

"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 resultant deterioration in business sentiment," said the report.

The decline in confidence had also been fuelled by a rising current account deficit, the report said, forecasting that the 2012 deficit would be equivalent to 3.8 per cent of gross domestic product before dropping to 3.3 per cent in 2013.

Though the government could expect to see growth pick up pace in 2013, it would be a long way short of government expectations, the report warned.