ADB lowers India's GDP projection for FY23 to 6.3%, FY24 retained at 6.7% | Mint
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Business News/ Economy / ADB lowers India's GDP projection for FY23 to 6.3%, FY24 retained at 6.7%
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ADB lowers India's GDP projection for FY23 to 6.3%, FY24 retained at 6.7%

The Asian Development Bank lowered India's gross domestic product (GDP) projection by one percentage point for fiscal 2022-2023 to 6.3 per cent from 6.4 per cent.

ADB lowers India's GDP projection for FY23 to 6.3 per cent from 6.4 per centPremium
ADB lowers India's GDP projection for FY23 to 6.3 per cent from 6.4 per cent

The Asian Development Bank (ADB) lowered India's gross domestic product (GDP) projection by one percentage point for fiscal 2022-2023 to 6.3 per cent from 6.4 per cent. The economic growth estimate was revised down on account of slowing exports and the likely impact of erratic rainfall on agriculture output.

The GDP projection for current fiscal (2023-2024) however, was retained at 6.7 per cent, when rising private investment and industrial output are expected to drive growth. Indian growth in the rest of this fiscal year and next will be propelled by robust domestic consumption as consumer confidence improves, and by investment, including large increases in government capital expenditure, according to the Asian Development Outlook September 2023.

ADB outlook on Indian economy

"As slowing exports could foment headwinds for the economy, and erratic rainfall patterns are likely to undermine agricultural output, the growth forecast for FY2023 is revised down marginally to 6.3 per cent," ADB said.

The downside risks arise from global geopolitical tensions, which may further create economic uncertainty and/or lead to a rapid rise in global food prices, ADB said. Further weather-related shocks either at the time of harvesting of kharif season (July-October) or during the October-April Rabi season may further affect agriculture growth, it said.

On the upside, it said, economic growth could be higher in FY25 than expected if foreign direct investment inflows are larger, particularly in the manufacturing sector, as a result of multinational corporations diversifying their supply chains by including India as a production location.

India’s GDP grew by 7.8 per cent year on year in the first quarter of current fiscal, reflecting strong growth in services and rising investment fueled by public investment and bank credit to the private sector.

ADB outlook on India's inflation trajectory

On inflation, the ADB report said, it moderated from 6.7 per cent in 2022 to 5.5 per cent in 2023. "Inflation has moderated broadly, but the forecast for FY2023 (2023-24) is raised owing to a spike in food prices, and the forecast for FY2024 (2024-25) is marginally lowered as core inflation moderates," it said.

The forecast is higher than the bank's April 2023 estimate because of unexpectedly high food prices, it said, adding, inflation is expected to moderate to 4.2 per cent in FY2024, slightly lower than previously forecast, due to core inflation becoming more subdued.

This forecast takes into account the effect of various government policy actions to reduce inflation, including export prohibition on non-basmati varieties of rice, export duties on other rice varieties, the maintenance of buffer stocks of pulses and onions, the removal of import duties on pulse imports, and a new fuel subsidy for cooking gas.

ADB lowers Asia's GDP projection

ADB also lowered the economic growth forecast for developing Asia to 4.7 per cent this year, which is lower than the 4.8 per cent expansion the bank had forecast in April, according to ADB. Growth in China will likely come in at 4.9 per cent this year, slower than the 5 per cent seen previously.

‘’Domestic demand is continuing to support developing Asia’s growth. The reopening of the People’s Republic of China, rebounding tourism, resilient service sectors, healthy money transfers into the region, and stable financial conditions are all helping support economic activity,'' said ADB on Asia's eocnomic outlook.

ADB cited three main risks to the outlook — impact of the weakness in China’s property sector, sporadic supply disruptions from Russia’s invasion of Ukraine and export curbs amid the risk of droughts and floods caused by El Nino.

“Developing Asia continues growing robustly, and inflation pressures are receding," ADB Chief Economist Albert Park said. “Some central banks in the region have started to lower interest rates, which will help boost growth."

 

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Published: 20 Sep 2023, 07:00 PM IST
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