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ADB Trims India's GDP Growth Forecast to 6.5% for FY20

The ADB had projected India's economy to expand at 7.2 per cent in its ADO for 2019-20 released earlier in April this year and cut it down to 7 per cent in the supplement to the ADO in July.


Updated:September 25, 2019, 5:29 PM IST
ADB Trims India's GDP Growth Forecast to 6.5% for FY20
A representative photo. (Courtesy: Moneycontrol.)

New Delhi: The Asian Development Bank (ADB) on Wednesday sharply lowered India's growth forecast from 7.2 per cent to 6.5 per cent for the current fiscal, though has it indicated that the country will grow faster than China.

The multi-lateral lending agency in its Asian Development Outlook (ADO) Update for 2019 cut the growth projection for India, which recorded an over six-year low growth of 5 per cent in April June quarter this fiscal.

"India's growth forecast for fiscal year 2019 is lowered to 6.5 per cent after growth slowed markedly to 5 per cent in the first quarter, April-June. Abrupt declines in manufacturing and investment reflect uncertainty ahead of general elections, subdued lending by banks and other financial institutions, stress in the rural economy, and a weakening external outlook," the agency said.

However, India is expected to rebound to 7.2 per cent growth in fiscal 2021 and join most other sub-regional countries in performing at or near their ADO 2019 growth forecasts for next year, it added.

The Manila-headquartered funding agency had projected India's economy to expand at 7.2 per cent in its ADO for 2019-20 released earlier in April this year and cut it down to 7 per cent in the supplement to the ADO in July.

As regards China, ADB has projected that growth will slip from 6.6 per cent last year to 6.2 per cent in 2019, and 6 per cent in 2020 - below previous projections - with increased government spending and a strong housing market partly offsetting the impact of the trade dispute with the US and sluggish manufacturing investment.

"In Hong Kong, China, recent political tensions, spill-over from the trade conflict, and the global electronics downturn will slow growth in 2019 and 2020 well below ADO 2019 projections," it said further.

On South Asian growth projections, the ADO Update said the growth momentum has softened in the region.

"Growth forecasts are lowered to 6.2 per cent for 2019 and 6.7 per cent for 2020.

"Growth in South Asia is now seen moderating this year as India's economy slows primarily for domestic reasons, such as the pre-election decline in investment and tighter credit conditions," it said.

Further, South Asia inflation forecast is lowered, largely reflecting unexpectedly low food prices in India, but the forecast for 2020 is maintained, as per the ADO Update. Asia girds for prolonged uncertainty, ADB said, adding the regional growth remains robust but is expected to moderate.

"GDP expansion in the region, though still strong, is projected to slow from 5.9 per cent in 2018 to 5.4 per cent this year, then edge back up to 5.5 per cent next year," it added.

The revisions reflect gloomier prospects for international trade, in part because of re-escalation in trade conflict between the US and China, and evidence of slowing growth in the advanced economies and China, as well as in India and the larger economies in east and southeast Asia.

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