New Delhi: The Indian economy is expected to grow at 6.9% in the current financial year 2012-13, against 6.5% in the last fiscal and faster than its peers in the South Asian region, despite a string of challenges like high inflation and uncertainties over government policies, the World Bank said.
"India will see growth (measured at factor cost) increasing to 6.9%, 7.2% and 7.4% in fiscal years 2012-13, 2013-14 and 2014-15, respectively," the World Bank said in its June 2012 report -- Global Economic Prospects (GEP) earlier Tuesday.
The South Asian region on the whole will grow at 6.4% in 2012, 6.5% in 2013, and 6.7% in 2014.
"Policy uncertainties, fiscal deficits, entrenched inflation, and infrastructure gaps will continue to weigh negatively on investment activity and are expected to limit regional growth," it said.
India's economic growth in the fiscal 2011-12 was weak on account of the Reserve Bank of India's monetary tightening, delayed policy reforms, and electricity shortages, large fiscal deficit and high inflation, the report noted.
Further, the "steep deceleration" in exports and "reversal of portfolio inflows" caused by the Euro zone debt crisis also slowed South Asian countries' economic growth to 7.1% in 2011 from 8.6% earlier in 2010, the World Bank said.
Earlier Monday, Standard & Poor's (S&P) warned that India could become the first among BRIC nations to lose its investment-grade rating primarily on account of slowing economic growth and political logjam that has held back key fiscal policy reforms, dragging down domestic markets after their buoyant rally last week.
India's fiscal fourth quarter (Jan-Mar) GDP grew 5.3% on-year, slower than the growth rate achieved even during the recession period of 2008-09 and slowest since March 2003, hurt by contraction in manufacturing and slowdown in agriculture and services.
The government has set a target to achieve a growth rate of 7.6% (plus, minus 0.25 basis points) in the current fiscal year on the back of likely pick up in industrial production.