The International Monetary Fund (IMF) has slashed India’s growth forecast to 4.9 per cent for 2012 due to low business confidence and “sluggish structural reforms.”

The IMF had in July projected a growth rate of 6.1 per cent for the current year. During the first quarter ended June 2012, Indian economy expanded by 5.5 per cent.

“India’s activity suffered from waning business confidence amid slow approvals for new projects, sluggish structural reforms, policy rate hikes designed to rein in inflation, and flagging external demand,” IMF said in the World Economic Outlook (WEO) released in Tokyo ahead of the IMF-World Bank 2012 Annual Meetings.

In India, the report said, “growth weakened more than expected in the first half of 2012, an outcome of stalled investment caused by governance issues and red tape, and a deterioration in business sentiment against the backdrop of a rising current account deficit and the recent rupee depreciation.”

Compared with the region’s growth performance in recent years, the near— and medium—term outlooks are less buoyant, the report said.

The report has projected 6 per cent growth for the next year (2013), compared to an earlier 6.5 per cent projection.

For 2012—13 fiscal, the IMF said that growth is projected to average 5—6 per cent in 2012—13, more than one percentage point lower than in the April 2012 WEO.

“The downgrade reflects both an expectation that current drags on business sentiment and investment will persist and a weaker external environment,” the report said.

More In: Economy | Business