ADB reduces India's GDP growth forecast for FY23 to 7%

22 Sep 2022 , 09:32 AM

On Wednesday, the Asian Development Bank (ADB) reduced its forecast for India’s gross domestic product growth for the fiscal year 2022—2023 (FY23) to 7% from 7.2%, citing weak global demand and tightening monetary policy to combat inflationary pressures brought on by high prices for oil and other commodities.

Although India’s GDP is slowly approaching its pre-pandemic trend level, Takeo Konishi, the ADB’s country director for India, warned that the global recession and rising inflation will likely have an impact on the country’s economic development in the near future. In the medium run, he said, “we think that the government’s ongoing efforts to reform the regulatory climate for companies and infrastructure will encourage investment and create more employment.”

The multinational organization decreased its 7.8% prediction for FY24 to 7.2%. The agency predicted that retail inflation will average 6.7 % in FY23 before lowering to 5.8 percent in FY24, remaining high over the next two years. “Private spending will be crimped by inflationary pressures. However, it was noted that subsidies for petrol and fertilizer, free food distribution, and excise duty reductions would help mitigate some of the effects of rising inflation on consumers.

The manufacturing sector is anticipated to develop more slowly due to growing input prices, according to ADB, even if the services sector is recovering. It said that a slowdown in the global economy would result in sluggish exports while the value of imports is anticipated to rise, and that agriculture value-added is likely to be somewhat lower due to the shrinking planted area and inconsistent rainfall.

“Public investment is more likely to lead to investment growth than private investment. The cost of subsidies and higher borrowing costs for the government due to rising policy rates will increase fiscal pressure until FY24, according to ADB, which also noted that India’s current account deficit may increase to 3.8 percent of GDP in FY23 as a result of a slowdown in exports and rising imports.

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