Asian Development Bank cuts its India GDP growth forecast for 2019-20 to 7.2% from 7.6% in December
ADB also cautioned that its growth projection could see further revision if downside risks materialize
New Delhi: The Asian Development Bank (ADB) has cut its India GDP growth forecast for 2019-20 to 7.2% because of a slower-than-expected pickup in investment demand. ADB, which had estimated 7.6% economic growth in December, is the first multilateral lending agency to slash India’s growth estimate.
With ADB’s downgrade of India’s growth estimates, the attention shifts to the Reserve Bank of India (RBI) and the International Monetary Fund (IMF), which had earlier projected 7.4% and 7.5% growth, respectively. IMF will release its World Economic Outlook next week, which will contain India’s growth estimates as well.
“The recent pickup in investment growth is expected to continue, albeit at a slow pace. Growth in public investment is likely to be modest for lack of funds. Rural income and consumption will enjoy policy boosts from enhanced income support to farmers and hikes in procurement prices for foodgrain, while interest rate cuts and soft food and fuel prices will bolster consumption in urban areas," ADB said in its annual Asian Development Outlook released on Wednesday.
ADB expects India's inflation rate to climb from 3.5% in 2018-19 to 4.3% in 2019-20, as food inflation accelerates with the increase in procurement prices paid to farmers, higher wages to agricultural workers and higher fertilizer prices. ADB also cautioned that its projection could see further revision if downside risks materialize.