India cuts growth rate forecast

India on Monday cut its growth forecast for the current fiscal year to just below six percent, putting Asia's third-largest economy on track for its worst annual performance in a decade. The finance ministry said "supportive" moves from the central bank would be needed even for the economy to expand at the revised level of 5.7-to-5.9 percent, down from 7.85 percent estimated at the start of the year. The forecast came a day before the bank was expected to keep the benchmark interest rate on hold as it waits for stubborn inflation to ease, despite mounting pressure for a cut to boost the sluggish economy. "It should be possible for the economy to improve the overall growth rate of GDP (for the year) to around 5.7 percent to 5.9 percent" from 5.4 percent in the first half, said the Mid-Year Economic Analysis tabled in parliament. The full-year rate would be far below the near double-digit pace India set before the onset of the global financial crisis. Finance Minister P. Chidambaram has been urging the central bank to reduce high interest rates to bolster the economy. But the bank has kept rates steady since April -- when it cut them for the first time in three years -- unlike other developing countries which have lowered borrowing costs to shield their economies from the eurozone crisis. India's bank has insisted inflation must recede and the government needs to curb its ballooning fiscal deficit -- the widest of all emerging market economies -- before more rate cuts. Growth in 2011-12 fell to a nine-year low of 6.5 percent hit by high interest rates, struggling overseas economies and sluggish investment caused by concerns about policymaking and corruption. India's economy has not expanded by less than 6.5 percent since the 2002-2003 financial year. Economists had already cut their year growth forecasts to mid-five percent or lower.