World Bank cuts India's GDP projection to 6% for 2012-13

NEW DELHI: The World Bank today cut India's growth forecast for the current fiscal to 6 per cent, from the earlier estimate of 6.9 per cent, citing corruption scandals and uncertainty in policy issues.

"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," the World Bank said in its report on India Economic Update, released today.

However, World Bank's growth forecast is quite optimistic compared to other agencies, including IMF. The multilateral funding agency has projected India to grow at 4.9 per cent in 2012, from 6.2 per cent pegged earlier.

The World Bank said it expects inflation to reach as high as 8 per cent by March 2013 due to higher domestic fuel prices among other things.

The Indian economy grew at 5.5 per cent in the April-June quarter. In the previous fiscal (2011-12), growth had fallen to a nine-year low of 6.5 per cent.

The data on the second quarter GDP is scheduled to be released on November 30, 2012.

The Bank said the slowdown is at least partly caused by structural problems -- power shortages, partly caused by the financial difficulties facing the electricity sector, the corruption scandals that have hit the mining and telecom sectors, investor uncertainty because of pending changes in legislation (mining, taxes, land acquisition), and the tightening constraints of land and infrastructure.

However, it should be noted here that the Government has already appointed a panel under eminent tax expert Parthasarathi Shome, which has given its report on the General Anti Avoidance Rules ( GAAR) and draft report on retrospective amendments to the Income Tax Act. The committee is expected to address the issues of stable environment for tax policies.