ADB sharply cuts India's GDP growth forecast to 6.5% for FY20, citing decline in manufacturing, investment

The Asian Development Bank on Wednesday sharply cut India's growth forecast to 6.5 percent for the current fiscal, weighed down by the GDP growth rate dipping to a six-year low in the first quarter

Press Trust of India September 25, 2019 12:35:19 IST
ADB sharply cuts India's GDP growth forecast to 6.5% for FY20, citing decline in manufacturing, investment
  • India's growth forecast for the fiscal year 2019 (FY20) is lowered to 6.5 percent after growth slowed markedly to 5 percent in the first quarter, April-June, said the Asian Development Outlook (ADO) 2019 Update

  • In its supplement to the ADO in July, the Manila-headquartered multi-lateral funding agency cut the country's GDP growth estimate to 7 percent for 2019-20 on the back of fiscal shortfall concerns

  • Abrupt declines in manufacturing and investment reflect uncertainty ahead of general elections, subdued lending by banks and other financial institutions, the stress in the rural economy, and a weakening external outlook, it said

New Delhi: The Asian Development Bank (ADB) on Wednesday sharply lowered India's growth forecast from 7.2 percent to 6.5 percent 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 percent in April-June quarter this fiscal.

"India's growth forecast for fiscal year 2019 is lowered to 6.5 percent after growth slowed markedly to 5 percent 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.

ADB sharply cuts Indias GDP growth forecast to 65 for FY20 citing decline in manufacturing investment

Representational image. Reuters.

However, India is expected to rebound to 7.2 percent 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 percent in its ADO for 2019-20 released earlier in April this year and cut it down to 7 percent in the supplement to the ADO in July.

As regards China, ADB has projected that growth will slip from 6.6 percent last year to 6.2 percent in 2019, and 6 percent 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 percent for 2019 and 6.7 percent 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 percent in 2018 to 5.4 percent this year, then edge back up to 5.5 percent 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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