The Asian Development Bank (ADB) today lowered India's GDP forecast for the current fiscal by 0.3 per cent to 6.7 per cent, attributing it to tepid growth in the first half, demonetisation and transitory challenges of tax sector reforms.
It has also revised downward the gross domestic product (GDP) outlook for next fiscal beginning from March 2018 to 7.3 per cent from 7.4 per cent mainly due to rising global crude oil prices and soft growth in private sector investment.
"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 economy is now expected to grow by 6.7 per cent, slower than the 7 per cent forecast in the (September) Update," ADB said in a supplement to its Asian Development Outlook (ADO) today.
India, the largest economy South Asia, rebounded to 6.3 per cent growth in the second quarter ended in September for this fiscal from 5.7 per cent in first quarter, reversing five consecutive quarters of deceleration.
However, ADO supplement expects growth to pick up in remaining two quarters of 2017-18 as the government is implementing measures to ease compliance with the new Goods and Services Tax (GST) as well as bank recapitalisation.
The Asian Development Bank, on the other hand, raised its economic growth estimate for developing Asia to six per cent for this year from a previous estimate of 5.9 per cent, citing stronger than expected exports and China’s resilience.
The Manila-based ADB kept Asia’s 2018 growth forecast at 5.8 per cent.
"Developing Asia's growth momentum, supported by recovering exports, demonstrates that openness to trade remains an essential component of inclusive economic development," ADB chief economist Yasuyuki Sawada said in a report, an update of the bank's previous estimates released in September.
China’s economy, the world’s second largest, is projected to expand by 6.8 per cent this year, higher than the ADB’s prior estimate of 6.7 per cent, on strong consumption, the bank said. It kept China’s 2018 growth forecast at 6.4 per cent.
By region, South Asia will remain the fastest growing region in Asia Pacific, the ADB said, even after the bank cut its 2017 forecast to 6.5 per cent from 6.7 per cent.
The recovery in the Indian economy “is more subdued than assumed earlier due to rising crude oil prices, soft private investment growth, and weather-related risks to agriculture,” the ADB said.
