NEW DELHI,Jan 19, 2012: The World Bank on Wednesday said the Indian economy is expected to grow by 6.8%, compared to PM Manmohan Singh's 7% projection and the 8.5% expansion witnessed in 2010-11. In addition, it warned that the 8% mark is unlikely to be regained anytime before 2013-14 due to moderation in demand, a deceleration in investment and heightened uncertainty in the wake of the global economic environment. Local factors such "policy uncertainty, stalled reforms, and deteriorating political and security conditions" are making things worse in South Asia, the multilateral agency said in the latest Global Economic Prospects. "Developing countries should prepare for further downside risks, as Euro Area debt problems and weakening growth in several big emerging economies are dimming global growth prospects." The growth moderation in developing countries such as India is also expected to take a toll on the global economy, it added. The report said that a deterioration in the international bank funding conditions and the impact on local stock markets has caused a sharp depreciation in local currencies, such as the rupee, against the dollar in the second half of 2011. Although inflationary pressures are expected to ease, the depreciation is not helping the price situation ease the way it should. Besides, without naming India, the Global Economic Prospects said fiscal policy had not helped combat the inflationary pressure. "A key factor working against monetary policy efforts is the overall stance of fiscal policy, which despite some consolidation, remains very loose."
