The World Bank has cut India's growth forecast for the current fiscal to 6 per cent from the already low 6.5% growth in the previous year, citing corruption scandals and uncertainty in policy issues. It had earlier projected a 6.9% growth in its global economic prospects report released in June.
Its report on economic updates said that ‘real GDP growth is forecast to reach around 6 per cent in 2012-13, after 5.3 per cent growth in the fourth quarter of 2011-12 and 5.5 per cent growth in the first quarter of 2012-13.'
While the multilateral agency acknowledged policy changes made by the government in September has led to a positive investor reaction, but it said the risks to growth from the high fiscal deficit remain. The World Bank also expects the inflation to reach as high as eight per cent by March-end, due to higher domestic fuel prices, among other things.
As per the Bank slowdown was caused partly by structural problems. It has pointed to power sector and has said that the sector faces immense challenges which, if not addressed urgently and effectively, will seriously constrain future economic growth and development prospects. The report said that power utilities will only return to financial health once they and policy makers focus on service delivery, tariffs, efficiency, and profitability.
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