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Indian economy to grow at slower pace of 6.7% in 2012: UN

India's economy will grow at a slower pace of 6.7 per cent in 2012 instead of a previous 7.7 per cent forecast, according to the United Nations, which warned that the euro area debt crisis will remain the biggest threat to world economy this year.

In its World Economic Situation and Prospects mid-year update, the UN said the global economic situation continues to be challenging and global growth will likely remain tepid in 2012 following a marked slowdown in 2011.

The global economy is projected to grow by 2.5 per cent in 2012 and 3.1 per cent in 2013, following a growth of 2.7 per cent in 2011, a slight downward revision from previous forecasts, the report said.

"An escalation of the euro area debt crisis could result in severe turmoil in financial markets and a sharp rise in global risk aversion, leading to a further weakening of global growth," the UN said in the report.

Most regions of the world would also be expanding at a pace below potential.

Economic growth in South Asia is projected to moderate to 5.6 per cent in 2012, down from 6.1 per cent in 2011 as the region continues to face significant regional and global headwinds.

India's economy is forecast to expand by 6.7 per cent in 2012, after growing by 7.1 per cent in 2011, it said.

In January this year, the UN had pegged India's economic growth rate at 7.7 per cent for 2012 and 7.9 per cent in 2013 in its World Economic Situation and Prospects.

Weak demand in developed countries and a slowing Chinese economy are likely to weigh on economic growth in East Asia.

Average regional growth is projected to slow from 7.1 per cent in 2011 to 6.5 per cent in 2012. Growth in China is forecast to slow from 9.2 per cent in 2011 to 8.3 per cent in 2012.

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