Policy paralysis in S Asia; Indian growth to slow: World Bank

New Delhi/Washington, Jan 18: The World Bank has estimated India's growth for the current fiscal at 6.8 per cent, lower than the government projection, as the economy faces headwinds of high interest rates and "heightened" uncertainty of policy reforms.

Without naming India, the World Bank in its 'Global Economic Prospects' report has said that South Asia's economies were also confronted with "domestic policy paralysis and uncertainty about regulatory reforms."

The Indian government has been expecting 7-7.5 GDP (Gross Domestic Product) growth in the fiscal ending March 2012, against 8.5 per cent in the previous year. The World Bank did not give an encouraging forecast even for the fiscal 2012-13. It expects the GDP expansion to remain flat at 6.8 per cent in the next financial year.

It would then bounce back to eight per cent in FY 2013-14. The economy expanded by 7.3 per cent in the first half of this fiscal. In the second quarter (July-September), growth moderated to 6.9 per cent, lowest in over two years, according to government data.

The World Bank report said "the weakening in activity reflects a significant moderation in domestic demand, led by a deceleration in investment activity that has faced headwinds of rising borrowing costs, high input prices, slowing global growth and heightened uncertainty.

"Delays and uncertainty surrounding the implementation of policy reforms have also hindered investment," it said. Addressing a Ficci meeting, Finance Minister Pranab Mukherjee also conceded that the government could not push through some key policy reforms due to divergence of political opinion in Parliament. Important pending measures include Goods and Services Tax, Direct Tax Code and relaxation of FDI policy.

PTI