ADB paints gloomy picture; cuts India FY20 GDP growth forecast to 6.5%

Abrupt declines in manufacturing and investment reflect uncertainty ahead of general elections, subdued lending by banks and other financial institutions, ADB said.

The Asian Development Bank on Wednesday sharply cut India's growth forecast to 6.5 per cent for the current financial year, weighed down by the GDP growth rate dipping to a six-year low in the first quarter.

"India's growth forecast for financial year 2019 (FY20) is lowered to 6.5 per cent after growth slowed markedly to 5 per cent in the first quarter, April–June," said the Asian Development Outlook (ADO) 2019 Update.

In its supplement to the ADO in July, the Manila-headquartered multi-lateral funding agency cut the country's GDP growth estimate to 7 per cent for 2019-20 on the back of fiscal shortfall concerns.

Abrupt declines in manufacturing and investment reflect uncertainty ahead of general elections, subdued lending by banks and other financial institutions, stress in the rural economy, and a weakening external outlook, it said.

"India is expected to rebound to 7.2 per cent growth in the financial year 2020 (FY21) and join most other subregional countries in performing at or near their ADO 2019 growth forecasts for next year," the ADB Outlook said.

As per the latest ADO, South Asia's growth momentum has softened.

For the region, the growth forecasts are lowered to 6.2 per cent for 2019 and 6.7 per cent for 2020, it said.