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Asian Development Bank (ADB) has lowered India’s economic growth forecast for FY2019 to 5.1 per cent on slowing job prospects, rural distress exacerbated by poor harvest and credit crunch.
The multilateral bank, however, expects the growth to pick up to 6.5 per cent next year on supportive government policies.
“In South Asia, India’s growth is now seen at a slower 5.1 per cent in fiscal year 2019 as the foundering of a major non-banking financial company in 2018 led to a rise in risk aversion in the financial sector and a credit crunch.
“Also, consumption was affected by slow job growth and rural distress aggravated by a poor harvest.
“Growth should pick up to 6.5 per cent in fiscal year 2020 with supportive policies,” the ADB said in a supplement to the Asian Development Outlook 2019 Update.
Earlier in September, it had trimmed India’s gross domestic product (GDP) growth to 6.5 per cent from the earlier estimate of 7 per cent.
For FY2020, it had projected a GDP growth of 7.2 per cent, which now has been cut to 6.5 per cent.
The Reserve Bank of India last week in its bi-monthly monetary policy review has cut India’s GDP forecast to 5 per cent from 6.1 per cent citing weak domestic and external demand.
While the International Monetary Fund (IMF) slashed India’s GDP growth projection to 6.1 per cent from 7 per cent, the World Bank lowered its estimate to 6 per cent.
The ADB said India’s growth in the first half of the current fiscal has slipped to 4.8 per cent as expansion in private consumption slowed to 4.1 per cent and in investment to 2.5 per cent.
Having already slowed year on year from 5.8 per cent in the fourth quarter of 2018-19 to 5 per cent in the first quarter of 2019-20, growth in India fell further to 4.5 per cent in the second quarter of FY2019-20, the lowest quarterly rate since the last quarter of 2012, it added.
The ADB said the domestic demand has weakened significantly since late 2018.
Some tentative signs have emerged that the Indian economy is stabilising in the second half of FY2019 (ending March 2020), it said.
