ADB cuts India growth forecast to 7.2% in FY20

New Delhi, April 3

Asian Development Bank (ADB) has lowered India’s growth forecast for 2019-20 to 7.2% from 7.6% estimated earlier due to moderation in global demand and likely shortfall in revenue on the domestic front.

For the just concluded fiscal (2018-19) also, ADB has cut the growth estimate to 7% from 7.3% projected in December last year.

“Growth slowed from 7.2% in fiscal 2017 to 7% in 2018, with weaker agricultural output and consumption growth curtailed by higher global oil prices and lower government expenditure.

“Growth is expected to rebound to 7.2% in 2019 and 7.3% in 2020 as policy rates are cut and farmers receive income support, bolstering domestic demand,” ADB said in its Asian Development Outlook (ADO) 2019 released today.

This growth will reverse two years of declining trend as reforms to improve the business and investment climate take effect, the ADO said.

The growth forecast for India has some downside risks such as moderation in global demand as financial conditions tighten, uncertainty arising out of global trade tensions, and the weak economic outlook in industrial countries, the report said.

“On the domestic front, growth could suffer if tax revenue falls short or any disruption affects the ongoing resolution of the twin problems of bank and corporate balance sheets,” it added.

India, however, will continue to be one of the fastest-growing major economies in 2019-20, it said.

“India will remain one of the fastest-growing major economies in the world this year given the strong household spending and corporate fundamentals,” said ADB chief economist Yasuyuki Sawada.

India has a golden opportunity to cement recent economic gains by becoming more integrated in global value chains, and the young workforce, improving business climate, renewed focus on export expansion all support this, Sawada said.

The Manila-based multi-lateral funding agency said recent policy measures by the government to improve the investment climate and boost private consumption will help India lift economic growth in the current fiscal year and the following. — PTI

Asian Development Outlook 

• For the 2018-19 fiscal also, ADB has cut the growth estimate to 7% from 7.3% projected in December last year
• Growth slowed from 7.2% in fiscal 2017 to 7% in 2018, with weaker agricultural output and consumption growth curtailed by higher global oil prices and lower government expenditure
• Growth is expected to rebound to 7.2% in 2019 and 7.3% in 2020 as policy rates are cut and farmers receive income support, bolstering domestic demand.