New Delhi: ADB today retained India’s growth projection for the current fiscal at 7.8 per cent, making it the fastest growing economy, but cautioned that delay in land and taxation reforms could hinder growth. In its Supplement to the Asian Development Outlook, which was released in March, ADB lowered China’s growth forecast to 7 per cent for 2015, from the earlier 7.2 per cent. For 2016, it is forecast to decelerate to 6.8 per cent.
“India’s growth forecasts remain at 7.8 per cent for this fiscal year and 8.2 per cent for next, supported by a healthy monsoon and new investment — and assuming concrete progress on reform,” Asian Development Bank said.
Indian economy grew 7.3 per cent in 2014-15. It also added that “risks to growth prospects could emerge from further delay in passing some legislations crucial to easing land acquisition for industry and to implementing a uniform goods and services tax (GST)”.
The land acquisition bill, which aims to make it easier for industry to acquire land for industrial corridors and other purposes, is facing stiff political opposition.
The GST Bill, is currently being scrutinised by a Rajya Sabha Parliamentary Committee. The government proposes to roll out GST, which would subsume excise, service tax and other local levies, from April 2016.
As regards the price situation, ADB said inflation remains low in India. It retained 2015 and 2016 inflation forecast at 5 per cent and 5.5 per cent respectively.
ADB’s estimates is, however, lower than the 8-8.5 per cent growth estimates of Indian government for the 2015-16 fiscal beginning April. It is better than 7.5 per cent projection by the International Monetary Fund (IMF).
ADB has also trimmed the growth projection for developing Asia because of subdued economic activity in US and China. It expects developing Asia to grow at 6.1 per cent in 2015, slower than 6.3 per cent estimated earlier.
ADB lowered the growth outlook for major industrial economies — the US, euro area and Japan — to 1.6 per cent, from the March projection of 2.2 per cent for 2015. For East Asia, it said, growth would be subdued and GDP would expand slower at 6.2 per cent in both 2015 and 2016.
As regards Asia’s largest economy China, ADB said the growth was slower than expected in the first half of the year. For full 2015, it has been revised down to 7 per cent and 6.8 per cent in 2016.
For India, it said, the pace of GDP growth is expected to accelerate to 8.2 per cent in 2016-17, driven by continued service sector growth and removal of procedural bottlenecks that have hampered investment flow.
“A healthy monsoon extending to early July has seen summer crop sowing increase 57.6 per cent over the last year and is expected to boost growth in agriculture. The number of new investment projects announced has continued to increase for the fourth consecutive quarter during the quarter ended June 2015, indicating brighter investment sentiment,” it said.
It added that improvements in indirect tax collection in the first quarter of the current fiscal points to some recovery in manufacturing. The index of industrial production rose at an average rate of 3.2 per cent in January–May 2015, double the 1.6 per cent growth in the same period of 2014.
“Muted hikes in rural wages and minimum support prices and a healthy monsoon would help rein in food inflation, while low crude oil prices globally bode well for fuel inflation as diesel and gasoline prices have both been deregulated,” ADB said.
For Asia as a whole, ADB anticipates that food prices would drop by 11 per cent in 2015, much sharper than 6 per cent anticipated earlier. On the global oil prices, the ADO supplement retained the March forecast of USD 65 per barrel for Brent crude on average in 2015 but revised down the projection for 2016 from USD 75 to USD 70.
