NEW DELHI: India's economy will grow at 6.7 per cent in the current fiscal year, less than an earlier estimate of 7.5-8.0 per cent, Prime Minister Manmohan Singh's Economic Advisory Council forecast on Friday.

In recent years the advisory panel has been overly optimistic about India's economic performance, and the revised forecasts are higher than estimates by private economists who now expect growth closer to 5.5 per cent for 2012/13.

India's economy has lost momentum due to global headwinds, sluggish policymaking, high interest rates and worries about a drought in parts of the country that may suppress investment and demand.

“The review acknowledges the current headwinds domestically, as well as global, and the downward revision is in line with broad expectations. However, given that there are cost slippage in government finances and reforms yet to come on board, alongside global uncertainty and geo-political risks, there could be downside to risks to growth and upside risks to inflation,” said Shubhada Rao, Chief Economist, Yes Bank, Mumbai.

“The GDP growth forecast looks on the optimistic side while inflation print can come below seven per cent at end March if the government doesn't raise fuel prices, but that will not be a true reflection of price pressures. In absence of specific government measures, it is difficult to expect capital inflows picking up. With the extent of forex intervention already done, the BoP (balance of payments) is already in deficit,” said A Prasanna, Economist, ICICI Securities Primary Dealership Ltd, Mumbai