The Asian Development Bank (ADB) has pegged India’s economic growth at 7.4 per cent for the current fiscal 2015-16, but warned of exports contracting due to weakness in external demand and the downside risk which the economy is facing due to sluggish private investment and weak rural demand. In a supplement published to its September report on the development outlook, ADB retained this year’s economic growth at 7.4 per cent, and next year’s at 7.8 per cent.
In its report it pointed out that continued strength in India is supported by growth in industrial production, public capital expenditure, and retail sales. This is helping offset slowdowns seen for Bhutan, the Maldives, and Nepal”.
It said that leading indicators such as sales of commercial vehicles, car sales, and air passenger traffic were also gathering momentum. However, continued weakness in external demand will likely cause exports to contract this year. However, it also said that India’s economy faces a downside risks from sluggish private investment and rural demand weakened by slow wage growth and a muted increase in support prices for agricultural products.
ADB said that average inflation in the first 7 months, at 4.6 percent, is broadly in line with the forecast of 5.0 percent in 2015-16 as inflationary pressure are expected to pick up in the remaining months as crude oil prices increase and economic activity accelerates. Though, it warned of exports contracting due to weakness in external demand and the downside risk which the economy is facing due to sluggish private investment and weak rural demand.