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India's economy is projected to grow at a slower-than-expected rate of 5.3 per cent this year, according to a United Nations report which said the country's slowdown may have bottomed out.
The UN World Economic Situation and Prospects 2014 (WESP) report said a mild recovery in investment as well as stronger export growth will help in the gradual GDP pick-up.
It said the Indian economy, which accounts for over 70 per cent of total output in South Asia, slowed further in 2013. The growth was held back by weak household consumption and sluggish investment, the report added.
Full-year growth decelerated to 4.8 per cent in 2013 from 5.1 per cent in the calendar year 2012.
It said external conditions continued to be challenging as the Indian economy experienced significant capital outflows, which led to a sharp depreciation of the rupee.
"While India's slowdown may have bottomed out, the recovery is likely to be slower than previously expected. Economic activity is forecast to expand by 5.3 per cent in 2014 and 5.7 per cent in 2015," the report said.
It said the gradual pick-up in GDP growth is likely to be supported by good monsoon, recovery in investment and stronger export growth on the back of improved global conditions.
The report further said that global economic growth is expected to increase over the next two years with continuing signs of improvement.
The global economy is projected to grow at a pace of 3 per cent in 2014 and 3.3 per cent in 2015, compared to an estimated growth of 2.1 per cent in 2013.
"The euro area has finally ended a protracted recession.
Growth in the United States strengthened somewhat. A few large emerging economies, including China and India, managed to backstop the deceleration they experienced in the past two years and veered upwards moderately. These factors point to increasing global growth," the report said.
It said the central government is unlikely to meet its target of reducing the deficit to 4.8 per cent of GDP in the current fiscal year 2013/14, since growth is below projections and the depreciation of the rupee pushes up the subsidy bill.
On consumer price inflation, the report said India will witness a slight dip in inflation at 9 per cent in 2014 from 9.7 per cent in the previous year. Inflation could dip further to 8.1 per cent in 2015, it said.
"While the Reserve Bank of India is expected to maintain its focus on inflation, it is unlikely to raise policy rates
considerably given the