The Asian Development Bank on Wednesday lowered India’s economic growth forecast for the financial year 2021-’22 to 10% from its projection of 11% released in April. The funding agency also said rising input costs will push inflation to 5.5% instead of the previous estimate of 5.2%.
In its Asia Development Outlook report, the bank said that India’s growth forecast was cut because the rise in coronavirus cases in May “dented the recovery”.
The funding agency expects the Indian economy to “rebound strongly in the remaining three quarters” and predicted a 10% growth in the full fiscal before “moderating” to 7.5% in 2022-’23.
“The outbreak, however, dissipated faster than anticipated, resulting in several states easing lockdown measures and returning to more normal travel patterns,” the report said.
The report also said that a deficient monsoon could worsen inflationary pressure. “Rising global oil and commodity prices, and soaring food prices due to delayed crop sowing, will continue to put upward pressure on India’s inflation,” it added.
The Asian Development Bank’s Director of Macroeconomic Research, Abdul Abiad, told The Hindu that the agency’s growth projections were a “bit optimistic”, given the Reserve Bank of India had retained real gross domestic product growth at 9.5% in August.
“We didn’t change it much from our earlier forecast, because we have only had one quarter of the fiscal year yet and with the wide uncertainty, we wanted to stick to that and see how things evolve,” Abaid said.
Meanwhile, the Asian Development Bank said China was on track to grow by 8.1% this year, with the pace of expansion projected to slow to 5.5% in 2022.