The World Bank Group reduced its fiscal 2019 GDP growth estimate for India by 150 basis points to 6.0%, citing a fall in domestic demand.
"India's cyclical slowdown is severe," the World Bank said in a report, noting that private spending and investment both grew slower than the country's overall GDP in the second quarter. Investment rose 4.0% on a yearly basis in the second quarter, down from 13.3% a year ago, while private consumption growth slowed to 3.1% from 7.3%.
India's manufacturing growth, meanwhile, dropped to under 1.0% in the second quarter from over 10.0% in the year-ago period.
The forecast is slightly below the Reserve Bank of India's projection of a 6.1% expansion, which itself was revised downward from a previous estimate of 6.9%. The World Bank expects India to record GDP growth of 6.9% in fiscal 2020 and 7.2% the year after.
The World Bank said decisive policy actions were required to curb the "critical situation." The Indian government's recent rollback of some corporate tax increases and additional tax cuts will help control the downturn, but also raise concerns about fiscal space, it added.
The World Bank also cut South Asia's GDP growth to 5.9% from its 7.0% projection in April, adding that a spike in private consumption and a slight rebound in investment may help growth reach 6.3% in 2020 and 6.7% in 2021.