Asian Development Bank cuts India’s GDP growth forecast for 2022-23, Auto News, ET Auto
New Delhi: The Asian Development Bank has cut India’s gross domestic product estimate for the current fiscal year 2022-23 to 7.2% from its previous projection of 7.5%, citing inflation higher than expected which will erode consumers’ purchasing power.
“India’s GDP growth moderated to 4.1% in the fourth quarter of FY2021 (FY2021, ended March 31, 2022) due to disappointing private consumption growth and a contraction in manufacturing India has been hit by Omicron variant COVID-19 and the economic crisis the impact of war in Ukraine,” he said in his latest report.
For the fiscal year ending in May, growth was revised to 8.7% from 8.9%.
“Although consumer confidence continues to improve, higher than expected inflation will erode consumers’ purchasing power. Some of the impacts of this can be expected to slow in the second half as the government needs to delay part of its public sector investment program due to limited fiscal space,” he said.
The Indian government has reprioritized spending to cover higher food and fuel subsidies, as well as other subsidies and transfers, due to the sharp increase in global oil and food prices due to the war in Ukraine, he said.
For the entire South Asia region. growth forecasts have been revised down from 7.0% to 6.5% for 2022 and from 7.4% to 7.1% for the next fiscal year.
“This mainly reflects a slight downward revision to India’s GDP growth forecast due to higher than expected inflation since April and monetary tightening, as well as the sharp contraction in Sri Lanka’s GDP due to of the country’s sovereign debt and balance of payments crisis. Growth prospects for other economies in the sub-region are largely unchanged as various positives offset global headwinds,” he said. he declares.
“Private investment will slow due to the higher cost of corporate borrowing as the RBI continues to raise policy rates to contain inflation. Net exports will decline due to weak global demand and the rise in the real effective exchange rate which erodes export competitiveness despite the depreciation of the rupee,” it said.
Given this, India’s growth in the next fiscal year is revised down to 7.8% from its earlier estimate of 8.0%.