India's economy has been held back by falling exports, high
interest rates and slow reforms
LONDON
(CNNMoney)
India's economy will
grow by about 5.8% this year, representing the slowest rate of growth in a
decade, according to revised official forecasts.
The
country's finance ministry said Monday it was expecting India's growth rate to
accelerate slightly in the second half of its financial year, which ends in
March 2013. But gross domestic product will still only expand by 5.7% to 5.9%
annually, compared with an earlier forecast of 7.6%. The last year growth was
weaker was 2002-03.
India has recently enacted reforms to allow more foreign investment in the retail sector but more will need to be done if the
world's second most populous nation is to return to the near double-digit rates
of growth seen in previous years.
Growth has slowed in India because of a sharp drop in
exports, stalled investments and a fall in business sentiment due to the slow
pace of reform and high interest rates.
The revised official forecast is consistent with the most
recent growth projections from the IMF, which were lowered in October due to
the drags on business sentiment and investment and a weaker external
environment.
The Reserve Bank of India (RBI) has been reluctant to cut
interest rates but lower inflation could pave the way for an easing in monetary
policy in the first half of 2013, economists say.
India is also battling to keep borrowing under control.
It is seeking to curb subsidies and sell stakes in a number of state-owned
firms in an attempt to cap the budget deficit at 5.3% of GDP in 2012-13.
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