Asian Development Bank has downgraded India's growth projection to seven per cent for the current fiscal year, while lowering its forecast for the next financial year as well.
"India's gross domestic product (GDP) growth is downgraded to seven per cent in financial year 2017-18, a 0.4 percentage point drop from the April forecast. In financial year 2018-19, the forecast is adjusted down to 7.4 per cent, from 7.6 per cent," ADB said in its Asian Development Outlook 2017 update.
However, the multilateral lender said India continues its strong showing although demonetisation and implementation of the new goods and services tax regime have dented consumer spending and business investment.
These short-term disruptions are expected to dissipate allowing these initiatives to generate growth dividends over the medium term, it added.
The latest report remains sanguine for much of the developing Asia in growth metrics as a result of the broad-based recovery in global trade, robust expansion in major industrial economies and improved prospects of China.
This will all combine to push growth in the developing Asia for 2017 and 2018 above previous projections, it added.
According to ADB Chief Economist Yasuyuki Sawada, growth prospects for the developing Asia are looking up, bolstered by a revival in world trade and strong momentum in China.
"Countries in developing Asia should take advantage of favourable short-term economic prospects to implement productivity-enhancing reforms, invest in badly needed infrastructure, and maintain sound macroeconomic management to help increase their long-term growth potential," he added.
ADB said a loose fiscal policy in the US and lower oil prices are potential upside risks to the region while downside ones include tighter global liquidity, economic disruption from a geo-political event, or a weather-related disaster.