ADB scales down India's growth to 7.4% for FY18

The Asian Development Bank (ADB) announced it had cut India’s economic growth projection to 7.4 per cent for 2017-18, from an earlier estimate of 7.8 per cent.

The earlier estimate was issued in March 2016, well before demonetisation and its effect. At 7.4 per cent, though, India will continue to be the fastest-growing major economy in the world. China’s economic expansion is projected by ADB at 6.5 per cent in 2017, from 6.7 per cent in 2016. 

Also, ADB has forecast developing Asia to post its slowest annual growth in 16 years, at 5.7 per cent this year. This category of theirs comprises 45 countries, including India, in the Asia-Pacific region. 

In its Asia Development Outlook, the Manila-based institution pegged Consumer Price Index-based inflation in India to average 5.2 per cent in 2017-18, up from 4.7 per cent in 2016-17, as the global economy recovers and commodity prices rebound. The Reserve Bank of India (RBI) has projected retail inflation in the first half of FY18 at 4.5 per cent, and five per cent in the second half. 

ADB’s growth projections, though, are broadly in sync with RBI’s. The latter has projected India’s gross value added to rise to 7.4 per cent in 2017-18, against 6.7 per cent the previous year. 

India’s economy grew 7.1 per cent in 2016-17, slower than the 7.9 per cent of 2015-16, attributed to the effect of demonetisation. The growth rate of FY16 might not be achieved in 2018-19 as well, when the economy is forecast to grow 7.6 per cent by ADB.

Says ADB: “The impact of demonetisation is dissipating as replacement notes enter circulation. Stronger consumption and fiscal reforms are also expected to improve business confidence and investment prospects.”