Asian Development Bank lowers India’s GDP forecast to 6.7%

New Delhi: The Asian Development Bank (ADB) on Wednesday lowered its Indian GDP forecast for the current financial year to 6.7 per cent citing tepid growth in the first half, demonetisation and transitory challenges posed by implementation of GST.

The multilateral lender also revised its Indian Gross Domestic Product outlook for the 2018-19 fiscal down to 7.3 per cent, from 7.4 per cent, largely due to the hardening of international crude oil prices and stagnant private sector investment in the country.

“Owing to tepid growth in the first half of 2017-18, the lingering effects of demonetisation in November 2016, transitory challenges of a new tax system, and some risks to agriculture stemming from a spotty monsoon in 2017, the economy is now expected to grow by 6.7 per cent, slower than the seven per cent forecast in the Update,” the ADB said in a supplement to its Asian Development Outlook (ADO).

In its September update, the ADB had downgraded India’s growth projection for the current fiscal to seven per cent and also lowered its forecast for the next financial year to 7.4 per cent, from 7.6 per cent.

GDP figures released by the Central Statistics Office here in November showed that, reversing five consecutive quarters of decline, growth in the second quarter ended September rebounded to 6.3 per cent, from 5.7 per cent in first quarter.

Meanwhile, a UN report released earlier this week in New York noted that subdued private investment in India, which has declined as share of GDP from 40 per cent in 2010 to 30 per cent in 2017, coupled with the staggering bad loans accumulated in the Indian banking system, are major causes of concern.

“The anaemic performance of private investment remains a key macroeconomic concern. Gross fixed capital formation has declined from about 40 per cent in 2010 to less than 30 per cent in 2017,” said the World Economic Situation and Prospects (WESP) 2018 prepared by the UN Department of Economic and Social Affairs (DESA).

The report said the global economy grew at an average of three per cent in 2017, the highest growth rate since 2011, and is expected to remain steady at three per cent in 2018 and 2019.

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