The further tightening of the monetary policy to contain inflationary trends would likely weaken domestic demand and economic growth of India and other countries like China and Brazil, says a UN report. Still, these three countries are leading the global financial recovery too, according to the report released on Thursday.

“If inflationary pressures continue to rise, authorities may feel a need for more aggressive monetary tightening, which would likely weaken domestic demand and economic growth in the outlook period,” said the mid-year growth report titled ‘World Economic Situation and Prospects 2011’ by the United Nations Conference on Trade and Development (UNCTAD) and the United Nations (UN).

It commented that India’s growth is moderating due to persistently rising inflation, emerging domestic asset price bubbles and upwards pressure on exchange rates, fuelled in part by large inflows of capital. It is same with countries like China and Brazil. “Lack of coordination had fuelled commodity price volatility, driving up food and energy poverty, which was ‘a matter of ongoing concern for the UN’,” said Jomo Kwame Sundaram, assistant secretary-general for economic development of UN.

According to the mid-year survey, India will grow at 8.1 percent in 2011 and 8.2 percent in 2012 respectively. It is less than the earlier growth prospects by -0.1 percent for 2011 and -0.2 percent for 2012.

“Weaknesses in major developed economies continue to drag the global recovery and pose risks for world economic stability in the coming years,” the report added.

“We forecast 3.3 percent growth in 2011, which is slightly higher than the 3.1 percent growth [forecast] in the annual report, and 3.6 percent growth in 2012,” said Robert Vos, director of the development policy and analysis division, UN.

The global recovery is fragile and uneven among countries. The report suggested greater resources must be transferred from rich countries to poor ones, not the other way around, especially to assist developing nations with limited fiscal space and large development needs.

The Paris-based think tank Organisation for Economic Cooperation and Development (OECD) on Wednesday pegged India's growth at 8.5 percent for the current fiscal. The finance ministry and RBI also projected India’s growth at 8 percent in 2011-12 separately.