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India’s government said the economy will likely register its slowest annual growth in a decade and expand just 5.0 per cent in the fiscal year ending in March, citing official estimates released Thursday.This is lower than an earlier forecast of 6.2 per cent for the year, as the economy continues to be hit by weaknesses in the manufacturing, farming and services sectors, data from the Central Statistical Organisation (CSO) showed.
The projection comes a day after a report by the International Monetary Fund forecast India’s annual growth declining from 6.5 per cent in 2011/12 to 5.4 per cent in the 2012/13 financial year.
Analysts said the government estimate — which may undergo a revision by time the fiscal year ends — underscores the urgent need for more reforms to boost growth.
“The government as a priority needs to take steps to revive investment,” Shubhada Rao, chief economist with private Yes Bank told AFP.
India’s finance ministry previously forecast the economy expanding by 5.7-5.9 per cent for the current fiscal year while the Reserve Bank of India projected growth at 5.5 per cent.
“The numbers are disappointing,” the Prime Minister’s top economic advisor C. Rangarajan told television channels on Thursday.
“But I believe that when the year is completed and more data available, the growth will be higher than what has now been estimated,” he added.
The government expects manufacturing output to grow 1.9 per cent this year against a 2.7 per cent rise last year, the CSO data showed.
India’s once-booming economy has slowed sharply due to high interest rates, Europe’s debt crisis and sluggish investment caused by domestic and overseas concerns about policy-making and corruption.
The Congress-led coalition government has introduced a series of measures since September to encourage foreign investment in key sectors and reduce subsidies, which have led to a ballooning fiscal deficit.
Last month, the RBI — responding to demands from the government and industry — cut interest rates for the first time in nine months and reduced the amount of cash banks must keep in reserve, to help boost investment.
The bank will next meet to decide on monetary policy in March, after the government unveils the federal budget on February 28.
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