Indian economy is projected to grow at a slower pace of 6.1% this year even as exports and capital investments are likely to be much better than in 2012, according to the United Nations.
The UN has trimmed its growth forecast from 7.2% estimated in June 2012.
However, the forecast of 6.1% growth for this year is much better than 5.5% expansion seen in 2012, as per the UN 'World Economic Situation and Prospects 2013' report.
"GDP growth in India will accelerate to 6.1% in 2013 and 6.5% in 2014 as a result of stronger growth of exports and capital investment... Investment demand is expected to respond to a more accommodative monetary policy stance and slightly improved business confidence," it said.
UN ESCAP's (Economic and Social Commission for Asia and the Pacific) Chief Economist Nagesh Kumar today said that India has huge growth potential in the long term.
India and China are playing a major role in the growth of world economy," he told reporters here.
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The slowdown in growth to 5.5% last year "reflected weaker consumption and investment demand as a result of persistent inflation, high nominal interest rates, large fiscal deficits and political gridlock," the UN said.
These factors would likely continue to impact economic growth in the next two years even as a moderate recovery is expected, it said.
According to the UN, India's annual growth declined from over 9% clocked in 2010 to about 5.5% last year,"the slowest pace in ten years".
Regarding measures to contain inflation in the country, Nagesh Kumar said monetary tightening would not be the "right tool".
He also expressed optimism that the Reserve Bank of India (RBI) would ease its policy in the coming months.
Wholesale Price Inflation (WPI) touched a three-year low of 7.18% in December but retail inflation continued to remain in double digit at 10.56%.
Further, WPI inflation was much above the central bank's comfort level of 4-5%. The inflation has not declined to the expected levels despite tight monetary stance pursued by the RBI to check price rise.
Meanwhile, the report said economic growth in South Asia fell to its lowest in 10 years in 2012.
"After growing by 5.8% in 2011... South Asia's gross domestic product expanded by only 4.4% in 2012. Going forward, economic growth in the region is projected to accelerate to 5% in 2013 and 5.7% in 2014, led by a gradual recovery in India," the UN said.
Indian economy accounts for almost three-quarter of South Asia's overall GDP. Other countries in South Asia region include Bangladesh, Nepal, Pakistan and Sri Lanka.