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The Asian Development Bank (ADB) has cut India’s economic growth forecast for 2016-17 to 7.4 per cent from the 7.8 per cent it projected last September.
This 7.4 per cent growth forecast was also lower than the 7.6 per cent advance estimate put out by the Central Statistics Office for 2015-16.
The reason for the revised forecast is the sharp reduction in budgeted capital expenditure growth, Abhijit Sen Gupta, Senior Economic Officer, India Resident Mission, ADB, told reporters.
As against 20.9 per cent growth in capital expenditure in 2015-16, the recent Budget has pegged it at about 4 per cent for 2016-17.
The Asian Development Outlook (ADO) 2016 report expects the Indian economy to accelerate to 7.8 per cent growth in 2017-18 as the benefits of banking sector reforms and the expected pick-up in private investments kick in.
M Teresa Kho, ADB India Country Director, said that Developing Asia’s growth is expected to soften to 5.7 per cent in 2016 from 5.9 per cent in 2015.
Economic growth continues to moderate in China. Output will increase 6.5 per cent in 2016, down from the 6.9 per cent increase in 2015. In 2017, growth will slow to 6.3 per cent, the report added.
Kho said that most Asian economies will benefit from low international food and fuel prices. ADB sees crude oil prices in 2016 averaging at $38 per barrel and about $45 per barrel in 2017. China’s slower than anticipated growth has also weighed on the decision to scale down the India growth forecast, Sen Gupta said. India’s export performance has been weak due to the fragile global economy and softer growth prospects for China.
The report expects consumer inflation, after two years of decline, to accelerate, fuelled by the salary hike for civil servants and a mild pick up in global oil prices. Consumer inflation for 2016-17 is expected to average 5.4 per cent, rising to 5.8 per cent in 2017-18.
Sen Gupta also said that the ADB does not see space for “aggressive” policy rate cuts by the Reserve Bank of India this year.
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