ADB scales back India's growth to 5.8%

ADB in April had projected a growth rate of 6% for India in 2013

On a day when finance minister P Chidambaram raised hopes that the economy would grow 6% or slightly more for the current financial year, the Asian Development Bank (ADB) has pegged the country’s growth at 5.8% this year, owing to slow progress in pushing through the reforms needed to ease business bottlenecks.

The new forecast is lower than its previous forecast of 6%. The latest Asian Development Outlook Supplement released today trimmed the 2013 growth forecast for the 45 developing member countries of ADB to 6.3% and cut its 2014 forecast to 6.4%.

In April, ADB had predicted the region to grow 6.6% this year and 6.7% next year.

“The drop in trade and scaling back of investment are part of a more balanced growth path for PRC, and the knock-on effect of its slower pace is definitely a concern for the region. But we are also seeing more subdued activity across much of developing Asia,” said ADB chief economist Changyong Rhee.

According to the report, the People’s Republic of China (PRC) is likely to see its economy expand 7.7% this year and 7.5% in 2014, after growth of 7.8% in 2012. It notes that import and export growth has slowed given weak external demand, but notes continuing robust consumer confidence.

“Slower growth in the PRC has subdued the outlook for the entire East Asia region as well as, to a lesser extent, for Southeast Asia where the Philippines and other large ASEAN countries are otherwise seeing solid growth,” it added.  

The report has also trimmed forecasts for Central Asia, reflecting the sluggish economic performance of Kazakhstan and Georgia, and for the Pacific where Timor-Leste is seeing a slowdown in government spending. Inflation pressures, meanwhile, are waning on the back of declining energy and food prices, given slower global demand for fuels and bumper grain harvests.

Chidambaram today said addressing the media that RBI’s steps to curb rupee liquidity are aimed at quelling excessive speculation and volatility in the forex market and should not be read as a prelude to policy rate changes.