The World Bank says that a lack of credit and drop in private consumption have led to a gloomy growth outlook for India with a steep cut in growth rate for the current fiscal year and only a modest gain projected for the next year.

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India's growth rate is forecast to be only 5 percent for the current fiscal year, weighed down by growth of only 4.5 percent in the July-September quarter, according to the 2020 Global Economic Prospects report released on Wednesday.

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The growth rate is forecast by the Bank to pick up to 5.8 percent in the next fiscal year and to 6.1 percent in 2021-22.

India's growth rate was 6.8 percent in 2018-19.

The 5 percent growth rate projection for the current financial year is a sharp cut of 2.5 percent from the 7.5 percent forecast made by the Bank in January last year, toppling it from the rank of the world's fastest-growing economy.

India's performance follows a global trend of lowered growth weighed down by developed economies.

The report estimated world economic growth rate to be only 2.4 percent last year and forecast it to edge up 0.1 percent to 2.5 percent in the current year.

Even with the lower growth rate of 5 percent in the current fiscal year and 5.8 percent forecast for the next, India holds the second rank among large economies, behind only China with an estimated growth rate of 6.1 percent for 2019 and 5.9 percent this year.

The report blamed "weak confidence, liquidity issues in the financial sector" and "weakness in credit from non-bank financial companies" for India's slowdown.

The Bank predicted India's recovery to 5.8 percent in the coming financial year for India but "on the monetary policy stance remaining accommodative" and the assumption that "the stimulative fiscal and structural measures already taken will begin to pay off."

It also warned that sharper-than-expected slowdown in major external markets such as United States and Euro Area, would affect South Asia through trade, financial, and confidence channels, especially for countries with strong trade links to these economies."

The Bank said that the growth of advanced economies was 1.6 percent last year and "is anticipated to slip to 1.4 percent in 2020 in part due to continued softness in manufacturing."

In contrast the growth of emerging market and developing countries is expected to accelerate from 3.5 percent last year to 4.1 percent this year, the report said.

In South Asia, Bangladesh is estimated to have the highest growth rate of 7.2 percent in the current fiscal year, although down from 8.1 percent last fiscal year.

But its higher regional growth rates are coming off a lower base with a per capita gross domestic product of $1,698 compared to $2,010 for India.

Bangladesh is expected to grow by 7.3 percent in the next financial year.

Pakistan's growth rate is estimated at only 2.4 percent in the current fiscal year and is projected to rise to 3 percent in the next, according to the Bank.

The Bank blamed monetary tightening in Pakistan for a sharp deceleration in fixed investment and a considerable softening in private consumption for the fall in growth rate from 3.3 percent in the 2018-19 fiscal year.

Sri Lanka's growth rate was estimated to be 2.7 percent last year and forecast to grow to 3.3 percent this.

Nepal grew by an estimated 6.4 percent in the current fiscal year and rise to 6.5 percent in the next.

First Published:Jan 9, 2020 11:21 AM IST