November 2012

The International Monetary Fund (IMF) 2012 had slashed India’s growth forecast to 4.9 per cent for 2012 due to low business confidence and sluggish structural reforms. The International Monetary Fund earlier in July projected a growth rate of 6.1 per cent for the year 2012-13. During the first quarter ended in June 2012, Indian economy expanded by 5.5 per cent. In the World Economic Outlook (WEO) released in Tokyo ahead of the IMF-World Bank 2012 Annual Meetings, International Monetary Fund stressed that India’s activity suffered from waning business confidence amid slow approvals for new projects, sluggish structural reforms, policy rate hikes designed to rein in inflation, and flagging external demand. The report has projected 6 per cent growth for the next year (2013), compared to an earlier 6.5 per cent projection.

The IMF also expressed that the series of reform measures taken by the government was expected to raise India’s gross domestic product (GDP) growth to six per cent in 2013. For 2012-13 fiscal, the IMF asserted that growth is projected to average 5-6 per cent in 2012-13, more than one percentage point lower than in the April 2012 WEO. The downgrade reflects both an expectation that current drags on business sentiment and investment will persist and a weaker external environment.

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