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NEW DELHI : The Asian Development Bank (ADB) on Wednesday retained its growth forecast for India at 10% for FY22 citing an expected surge in domestic demand and exports, notwithstanding a dramatic second wave of covid-19 infections that struck in April and May. 

In July, ADB had downgraded its growth projection for India to 10% from 11% for FY22.

In its update to Asian Development Outlook, ADB said GDP growth is expected to moderate to 7.5% in FY23.

“The second covid-19 wave dissipated more quickly than anticipated, with daily cases averaging about 40,000 by the end of August 2021. Several states have eased lockdown measures, and Google Mobility data show travel patterns starting to return to normal. This update assumes that the economic impact of a third wave, if it occurs, will be limited thanks to the vaccination drive progressing on schedule, better preparedness in firms and households, and two-thirds of the population found by nationwide serological surveys to possess some antibodies against the SARS-CoV-2 virus," ADB said. 

On Tuesday, OECD slashed its growth projection for India to 9.7% for FY22 from 9.9%. 

“The Indian economy is showing encouraging signs of recovery as the effects of the second wave dissipate," said ADB country director for India Takeo Konishi. “The government’s vaccination drive, its new fiscal stimulus package, and initiatives to free more resources for infrastructure development, along with measures to strengthen health-related interventions, are helping speed up recovery." 

ADB projected the economy to rebound in the last three quarters of FY22, as reflected in improvements in e-way bills, mobility data and the purchasing managers’ index. First-quarter GDP rebounded 20.1% from a year earlier even as the second wave of the pandemic curbed economic activity.

Private consumption and investment are projected to remain weak due to the pandemic’s impact on household incomes, spending capacity and lending. However, the government’s national monetization plan is expected to drive public investment to boost infrastructure development.

“Growth in the agriculture sector will remain resilient, yet marginally lower with the pandemic’s spread into rural areas and a delayed monsoon. Exports will rebound, supported by the recovery in global demand," ADB said. 

ADB said with weak private consumption and investment, recovery should be supported by public investment.

“The government’s national monetization plan for brownfield infrastructure assets is expected to free resources worth 6 trillion over the next three years with which to finance infrastructure development. Effective implementation of the plan will be, however, crucial. Further, government loans and grants have provided additional fiscal space to state governments as an inventive to increase capital expenditure, and it provides interest-free loans to enable state initiatives to monetize their public assets," it added.

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