New Delhi: India is expected to see a slower economic growth of 5.9 percent in the current fiscal even as there are reasons to believe the "economy has turned the corner", an United Nations agency report said on Thursday.
The UN Economic and Social Commission for Asia and the Pacific (ESCAP) said ndia's growth has been slowing down since 2011, mainly on account of "severe" monetary tightening by the Reserve Bank of India.
"India is projected to grow at 5.9 percent in 2012-13 compared with 6.5 percent in 2011-12," UN ESCAP said in the report titled 'South and South-West Asia Development Report 2012-13'.
Projecting a GDP growth of 6.8 percent for 2013-14, it said there are reasons to believe the economy has turned the corner.
"Firstly, in September 2012, the government signalled its determination to pursue pending economic reforms including FDI in multi-brand retail and civil aviation and the partial phasing out of fuel subsidies," it noted.
Further, the report said this year's monsoon season was not as weak as initially feared.
The Indian economy has been slowing down since 2011, after clocking over 8 per cent average growth in the previous three years.
India's growth rate of 6.5 percent last fiscal was the lowest since 2002-03.
"The global economic slowdown provides only part of the explanation for this marked decline. A more important factor has been the severe monetary tightening by the RBI of policy rates in 13 episodes between March 2010 and December 2011 in order to curb inflationary expectations," the report said.
According to the agency, high inflation as well as high interest rates adversely impacted private consumption growth, industrial investments and business sentiment.
Emphasising that ESCAP is "bullish on India's growth prospects", its chief economist Nagesh Kumar said RBI needs to ease monetary policy.
"It is time to loosen the policy," he said, adding the current inflationary trends are due to supply side issues and not demand side problems.
The South and South-West Asia region has nine countries besides India. They are Afghanistan, Bangladesh, Bhutan, Iran, Maldives, Nepal, Pakistan, Sri Lanka and Turkey.
As per the ESCAP report, the sub-region should guard against the volatility that policies such as the third round of quantitative easing in the US may bring in.
"These include rising inflation as well as financial and exchange rate instabilities," it added.