India Slashes 2013 Growth Forecast to 5%

India expects its economy to grow by 5.0 percent for the fiscal year ending in March 2013, the lowest pace in a decade, indicating continued weakness in the economy.

The lower growth rate estimated by the Central Statistical Office (CSO) compares to a 5.5 percent growth forecast by India's central bank in January and a 6.2 percent growth reported in the previous fiscal year.

India's finance ministry had earlier cut the growth forecast to about 5.8 percent in December from the previous forecast of 7.6 percent announced in the national budget in March.

Asia's third largest economy has recently recorded sharp decline in several sectors, including manufacturing and farm products.

According to CSO estimates, sectors such as agriculture, forestry and fishing are expected to grow at 1.8 percent, manufacturing at 1.9 percent and electricity, gas and water supply at 4.9 percent. The growth in the mining and quarrying sector is estimated to slow down to 0.4 percent.

Industrial activity in the country has been suffering from slow pace of economic reforms, large fiscal and current account deficits and significantly high inflation rates, which have restricted investments.

The IMF earlier said that the Indian economy is facing the risk of decelerating further if the government delays structural reforms. The agency had forecast India to grow at a rate of 5.4 percent in 2013.

In order to help boost investment in the country and revive economic growth, the Reserve Bank of India (RBI) cut interest rates in January for the first time in nine months.

Further rate cuts from the central bank are unlikely in the near term without a drastic improvement in the inflation and current account deficit levels.

In the present scenario, Prime Minister Manmohan Singh's government is expected to present a growth-oriented budget on 28 February for the next fiscal year, beginning in April.

As the government is struggling to reduce its fiscal deficit, Finance Minister P. Chidambaram is also likely to announce more spending cuts, especially in the areas of welfare, defence and road projects in the upcoming budget.