The International Monetary Fund (IMF) has lowered India’s 2012 economic growth forecast to 6.1 per cent, from 6.8 per cent projected in April.
For 2013, the growth forecast has been lowered to 6.5 per cent, the July update of the IMF’s World Economic Outlook (WEO) released on Monday showed.
In its April 2012 WEO, the IMF had projected India’s economic growth for 2013 at 7.2 per cent.
The IMF has in its July update noted that in the past three months, the global recovery, which was not strong to start with, had shown signs of further weakness.
The global growth forecast for 2012 has been trimmed to 3.5 per cent from 3.6 per cent projected earlier. Similarly, the 2013 forecast stands reduced to 3.9 per cent, marginally lower than the April 2012, WEO outlook projection of 3.6 per cent.
Financial market and sovereign stress in the Euro area periphery have ratcheted up, close to end-2011 levels.
The growth momentum has slowed in a number of major emerging market economies, notably Brazil, China and India, it said.
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, according to the WEO update.
Many emerging market economies have also 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.
The July update of the Global Financial Stability Report noted that emerging markets were facing extraordinary uncertainty about external conditions impinging on their economic performance.
Earlier this year, policymakers across several emerging market economies were still worried about large-scale capital inflows and excessive appreciation of their currencies.
Such fears have given way to concerns about overly rapid depreciation and increased volatility, as currencies like the Brazilian real or the Indian rupee depreciated by between 15 and 25 per cent in less than one quarter, the report said.