HYDERABAD: The Asian Development Bank (ADB) on Thursday lowered India’s GDP growth forecast for FY 2019-20 to 7 per cent, citing shortfall in fiscal outturn in FY19.
However, Asia’s third-largest economy continues to be the fastest-growing in the South Asian region, according to the development agency.
This is the second revision in four months by ADB, which first lowered India’s growth forecast for FY20 in April to 7.2 per cent from 7.6 per cent estimated earlier, due to moderation in global demand and likely shortfall in domestic revenues.
That said, India’s growth remains above that of China, whose GDP growth plunged to a 27-year-low of 6.2 per cent in Q1, and is estimated to grow by 6.3 per cent in FY20 and 6.1 per cent in FY21. Despite subdued growth across large Asian economies, South Asia’s growth is estimated at a healthy 6.6 per cent for FY20 and 6.7 per cent for FY21.
Though this is slightly lower than its previous forecast, it is way above the global average of 3-3.5 per cent. “The GDP growth forecast for FY19 is revised down from the ADO 2019 forecast of 7.2 per cent to 7 per cent, mainly reflecting the unexpectedly weak FY18 outturn,” it said in a supplement to Asian Development Outlook (ADO).
Referring to a slump in India’s GDP growth during Q4 of FY19, it stated that the slowdown was broad-based with private consumption and investment growth slowing from previous quarters. ADB also mentioned that the US decision to end preferential trade treatment for India under its Generalized System of Preferences would have minimal effect as it benefited only 1.8 per cent of all Indian exports.
It expects agriculture to grow well, on hopes of a normal monsoon. “Growth is expected to inch up again to 7.2 per cent in FY20, helped by recent reforms to improve the business climate, strengthen banks and relieve agrarian distress,” it said. ADB said US-China trade tensions will remain the largest downward risk to the outlook. “Until the world’s two largest economies reach an agreement, uncertainty will continue to weigh on the regional outlook,” said ADB chief economist Yasuyuki Sawada.