India growth to plunge to 5.7%: RBI

The country's economic growth in the current fiscal is likely to drop to 5.7 per cent while inflation may inch upwards from the earlier projections, an RBI sponsored survey said today.

"The median projection for 2012-13 in the Reserve Bank's Survey of Professional Forecasters has been lowered to 5.7 per cent from 6.5 per cent for growth, while that for average WPI inflation is revised upwards to 7.7 per cent from 7.3 per cent," the RBI said on eve of its quarterly credit policy review.

Growth has averaged 5.4 per cent over the previous two quarters which is lower than 6.5 per cent in 2011-12 and 6.7 per cent in crisis-hit 2008-09.

"Although, growth in Q2 of 2012-13 is unlikely to be significantly different, gradual recovery could follow later in the year," RBI added.

RBI said that part of the slowdown in the economy was due to weak global growth, domestic factors have magnified the growth slowdown. High inflation which necessitated monetary policy action, partly contributed to slowdown.

"But, beyond this, inadequate movement on the policy and implementation fronts worsened the investment climate that had already suffered due to global uncertainties and the cyclical downturn in the Indian economy," RBI added.

It said that while a slew of policy measures by the government have started addressing concerns, the measures by themselves are "not sufficient" to address the macro and structural problems constraining growth.

"If the announced domestic reform measures are well-implemented and complemented by further reforms, the economy would turn-around, despite the current expectations and sluggish global growth.

"...the key to recovery lies in policy coordination among different government agencies and the removal of structural bottlenecks in infrastructure projects," it said.

Referring to inflation, RBI said it has stayed sticky around 7.5 per cent. Persistent non-food manufactured product inflation, despite the growth slowdown has emerged as a concern, it added.

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