India will grow at 7-8 percent over the next two years, according to the latest update from the World Bank. From the previous high projections, the World Bank’s India Economic Update (September) said that the slowdown projection was based on uncertainties weighing down investment and tighter macroeconomic policies intended to fight still-high inflation.

“The risks from the uncertain international environment are high… A worst-case international scenario would lead to a collapse of demand for India’s exports, and strong contraction in private sector spending, as was observed after the Lehman collapse in 2008,” the Washington-based Bank said in a release. “Policymakers would do well in reviewing crisis preparedness at this time.”

The Bank also said that the slowdown in investment, capital outflows, and decline in the stock market point to deeper structural problems of the country.

The Bank’s figure is less than the Indian government’s projection. The prime minister’s economic advisory council expects growth to measure 8.2 percent in 2011-12, while inflation is expected to drop to around 6.5 percent by end-March 2012.

The Bank also said that inflation was likely to ease in the third quarter of this fiscal. “It is forecast to decelerate from Q3 of FY2011-12, which would allow the RBI to lower policy rates eventually,” it said.

India grew at 8.5 percent in 2010-11.