ADB lowers India’s GDP forecast

NEW DELHI: The Asian Development Bank (ADB) has revised downwards India’s growth forecast for FY18 and FY19 to 6.7 per cent and 7.3 per cent, respectively, primarily due to the lingering impact of demonetisation, teething troubles in GST and seasonal weather-borne risks to agricultural output. ADB had initially forecast growth rates of 7 per cent and 7.4 per cent for the current and next financial years.

ADB’s downward revision comes weeks after GDP growth numbers for the second quarter of the current financial year were released, which saw the economy reversing a five-quarter decline in growth to 5.7 per cent in the first quarter. GDP growth however, reversed the decline in Q2 at 6.3 per cent.

Making its forecast in its Asian Development Outlook Supplement, ADB added that growth is expected to pick up in the remaining two quarters of the fiscal ending March 31, 2018, as “the government implements measures to ease firms compliance with the new goods and services tax (GST)”. Growth would also be boosted by government efforts to improve balance sheets of state-owned banks, in part through an augmented bank-recapitalisation programme and a supportive global environment.

“However, owing to tepid growth in the first half of 2017-18, the lingering effects of demonetisation in November 2016, transitory challenges of a new tax system, and some risks to agriculture stemming from a spotty monsoon in 2017”, the economic growth forecast has been lowered, it said.

As for the next financial year, growth forecasts have been revised downward due to expectations of a faster recovery in crude oil prices, which would add to fiscal pressure, and “private investment growth is expected to remain soft”. This would add to inflationary pressures, with inflation beginning to increase after remaining subdued for the better part of the year.