New Delhi, Oct 2 (IANS) The Asian Development Bank (ADB) Wednesday sharply lowered its forecast on India's economic growth to 4.7 percent for this year from its earlier projection of 6 percent.
In an update of its flagship annual economic publication, Asian Development Outlook 2013, the ADB said the Indian economy has been under pressure with the recent depreciation of the rupee and capital outflows adding to structural constraints which are weighing heavily on its prospects for returning to a high growth path.
"With gross domestic product in the first quarter of 2013-14 expanding at its slowest pace since the global financial crisis, ADB revised down its growth forecast to 4.7 percent from 6 percent projected in April," the Manila-based lender said.
It has also lowered the growth forecast for next financial year to 5.7 percent from its earlier projection of 6.5 percent.
The Indian economy grew by 5 percent in the financial year ended March 31, 2013.
"The recent financial market turbulence is a timely reminder of the need for structural and fiscal reform not just to ensure long-term growth but also to keep financial markets stable in the short-run," said ADB chief economist Changyong Rhee.
To convince the markets that India remains on the strong and sustainable growth path, the ADB said structural reforms must be strengthened to expedite large infrastructure projects already delayed, encourage foreign direct investment, and alleviate other constraints to long term growth.
"One bright spot is the recent effort at expediting regulatory clearance for several large projects in key infrastructure sectors such as power, roads, and railways by the Cabinet Committee on Investment," it said.
According to the multilateral lender, elections and a new government in early 2014-15 may help give fresh impetus to resolving structural problems.
"Policy measures since July 2013 to entice foreign investors back to India to help finance the current account deficit are expected to gain traction in the near future," it said.
The ADB has presented better picture on inflation. It has lowered its projection on India's inflation for the current financial year to 6.5 percent from its earlier forecast of 7.2 percent announced in April.
"Wholesale prices have seen some renewed upward pressure from currency depreciation impacts and a spike in food and fuel costs, but tighter monetary policy will have some mitigating effect, along with depressed economic activity," it said.