In fallout to government’s demonetization drive, the Asian Development Bank (ADB) has lowered India’s gross domestic product growth forecast to 7% in FY17 from its earlier estimate of 7.4%, citing adverse impact of demonetisation in the short run. However, the multilateral agency has retained its earlier projection of 7.8% GDP growth for the country in FY18.
In its Asian Development Outlook 2016 update, ADB said its lower growth projection for India is due to weak investments, a slowdown in the country’s agriculture sector, and the lack of available cash due to the government’s decision to ban high-denomination banknotes. However, it added that the effects of the transition are expected to be short-lived and the Indian economy is expected to grow at 7.8% in 2017.
The multilateral agency lowered its 2016 economic growth forecast for Asia to reflect slower-than-expected expansion in India, slightly lower than its previous forecast of 5.7 percent. However, the ADB left its growth projection for 2017 unchanged at 5.7 percent. ADB trimmed its growth forecast for south Asia as well as developing Asia too. South Asia’s growth is now projected at 6.6% in 2016 from 6.9% while developing Asia except Japan is expected to grow at 5.6% during the same year, down from 5.7% expected earlier. Regarding China it said that it is expected to hit 6.6% this year, driven by strong domestic consumption, solid wage growth, urban job creation, and public infrastructure investment. The forecast for the PRC in 2017 is maintained at 6.4%.
