Asian Development Bank (ADB) on Thursday scaled down its projection for India's economic growth to 6.5 per cent for this financial year, from the 7 per cent estimated earlier. This is among the lower band of projections — 6.5-7 per cent — made by Prime Minister Manmohan Singh and his policy advisors in various statements. The Budget had assumed the growth to be 7.6 per cent, against 6.5 per cent last year.
ADB also said persistent high inflation and trade deficit made it difficult for RBI to ease its monetary stance at least in the first half of this year to perk economic expansion, in its ‘Outlook Supplement’ report. ADB revised its outlook given in the April report, whichpegged economic growth in India at seven per cent for the current financial year.
Basically, when ADB says 2012, it means fiscal year in the context of India.
The supplement said the weakness in the economy was reflected in declining business confidence, slow credit growth and subdued sales of automobile sector.
"With persistently high inflation, monetary policy has little room to counter the slowdown in economic growth...High inflation and trade deficit make it difficult to ease monetary policy to stimulate demand," ADB said. The Reserve Bank is scheduled to announce its quarterly review of monetary policy on July 31.
It, however, agreed with policymakers that the economy would show a turnaround from the second half of this fiscal.
The impact of monetary easing and lower interest rates, improving external conditions and some progress on stalled reforms should lead to a revival of industrial activity in India starting in second half of 2012-13 and into 2013-14, the report said.
The Manila-based multilateral lender, however, lowered the India's growth forecast for 2013-14 to 7.3 per cent, from the 7.5 per cent projection made in April. End