NEW DELHI: India on Monday cut its growth forecast for the current fiscal year to just under six percent, putting Asia's third-largest economy on track for its worst annual performance in a decade.
The finance ministry said "supportive" moves from the central bank would be needed even for the economy to expand at the revised level of 5.7-to-5.9 percent, down from 7.85 percent estimated at the start of the year.
Prime Minister Manmohan Singh's scandal-scarred government has unleashed a blitz of economic reforms to draw more investment and jumpstart growth before facing voters in polls due in 2014 and avert a threatened credit downgrade.
The new official forecast tabled in parliament came a day before a central bank meeting at which policymakers were expected to keep benchmark interest rates on hold until inflation stubbornly high at 7.24 percent eases.
There have been mounting demands from business leaders for rate cuts to boost the sluggish economy hit by high borrowing costs, a global downturn and an investment slowdown amid concerns about policymaking and corruption.
The projected full-year growth to March 2013 would be far below the near double-digit pace India logged before the onset of the global financial crisis and the lowest since the economy grew by four percent in 2002-03.
The hawkish central bank has kept rates steady since April when it cut them for the first time in three years unlike its developing market peers which have lowered borrowing costs to offset the impact of the eurozone crisis.
The finance ministry said it expected inflation which has receded from near double digits to ease further and "facilitate a softening" of interest rates.
The government also said its pledge to trim the deficit the widest of all big emerging market economies to 5.3 percent from 5.8 percent last year was "challenging" but achievable with plans for stake sales in state-run firms.
Economists had already pared their growth forecasts to mid-five percent or lower. Much of the world would envy such growth but the pace is not nearly enough for India which says it needs near 10 percent to reduce crushing poverty.
Still, the ministry said there "are reasons to believe" the slowdown has bottomed out.
Data has pointed to an upturn with industrial output growing by 8.2 percent year-on-year in October the fastest pace in 16 months.
"The second half will be better than the first half," said the Prime Minister's Economic Advisory Council Chairman C. Rangarajan, projecting growth of 5.5 to six percent this year. But he said India needs to grow "much faster".
Average income in the country of 1.2 billion is still just $1,600 and "if we grow at 8-9 percent, by 2025 we'll reach somewhere around $10,500. It's only then India will graduate from a low-income country to a middle-income country."
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