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  3. ADB lowers India’s economic growth forecast to 5.1% for FY20

ADB lowers India’s economic growth forecast to 5.1% for FY20

11 Dec 2019 Evaluate

The Asian Development Bank (ADB), in its latest Asian Development Outlook Supplement report has lowered its forecast for India to 5.1% for fiscal year 2019-20 (FY20) from its September estimates of 6.5% as the foundering of a major nonbanking financial company in 2018 led to a rise in risk aversion in the financial sector and a credit crunch. Also, consumption was affected by slow job growth and rural distress aggravated by a poor harvest. It added that growth should pick up to 6.5% in next fiscal year with supportive policies. In September, it had forecast India’s GDP to grow 7.2% in next fiscal year.

As per the report, it has lowered its growth forecasts for developing Asia this year and the next, as a weaker outlook for China and India indicated softer economic activity elsewhere in the region. The bank trimmed its growth forecast for developing Asia to 5.2% in 2019 and 2020, it said in an updated annual outlook report, from 5.4% and 5.5% previously. It cut its growth estimates for China for this year and the next to 6.1% and 5.8%, respectively, from the 6.2% and 6.0% forecasts announced in September, on the US-Sino trade tensions and as higher prices of pork cut into consumer spending.

It said while growth rates are still solid in developing Asia, persistent trade tensions have taken a toll on the region and are still the biggest risk to the longer-term economic outlook. It also said inflation, on the other hand, is ticking up on the back of higher food prices, as African swine fever has raised pork prices significantly. It noted that developing Asia faces rising food costs, with 2019 and 2020 inflation seen at 2.8% in 2019 and 3.1% in 2020, up from the lender's previous estimate of 2.7% for both the years.

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