ADB lowers India's growth forecast to 7.4% for FY17

Asian Development Bank (ADB) in its flagship publication Asian Development Outlook (ADO) has projected that the India's growth rate for the fiscal year 2016-17 will be pull down from 7.6 per cent this year due to global headwinds however reforms will help the country remain one of the fastest growing economies in the world. ADB growth forecast of 7.4 per cent for 2016-17 is substantially lower than its earlier projection of 7.8 per cent.

ADB has also projected the rise in consumer inflation, mainly on account of the impact of salary hike of government employees and a likely mild pick up in global oil prices. Inflation is expected to average 5.4 per cent in next fiscal, rising to 5.8 per cent in 2017-18. Furthermore, ADB in its outlook has said that in the next fiscal year weak global economy will continue to weigh on exports, offsetting a further pickup in domestic consumption, due in part to an impending salary hike for government employees.

However, it said that public investment would remain strong next fiscal and strong PSU banks will help bring in an uptick in bank credit and boost private spending in 2017-18 fiscal. Public banks' non-performing assets and an over-leveraged corporate sector leave limited scope for more private investment in infrastructure and highlight the need for policy actions.

ADB's Chief Economist Shang-Jin Wei has said that 'The potential growth of the country can be raised further if it can successfully implement necessary reforms including unifying the tax regime, improving labour market regulations as opening further to foreign direct investment and trade’. Moreover, ADB projected recovery in exports in 2017-18 fiscal as large economies show a mild growth rebound, and improved business environment with government policy actions in place.