ADB Cuts India's Growth Forecast To 6.5%, Private Consumption Growth At Four Year Low

The Asian Development Bank (ADB) stated today that with India's GDP growth weakening considerably in the first quarter (Q1) of fiscal year 2019 (FY2019, ending 31 March 2020), slower growth at 6.5% is now forecast for this year compared to 7.2% estimated earlier. Proactive policy interventions should foster recovery into FY2020, with growth expected to rise to 7.2%, only marginally lower than forecast in ADO 2019. A slowing economy, benign food inflation, and declining oil prices motivate reductions to inflation forecasts, even as monetary policy loosens. The current account forecast is revised for a narrower deficit in FY2019 than projected in April, reflecting weaker aggregate demand and lower oil prices, but, with GDP growth expected to revive, the forecast is retained for a wider deficit in FY2020. Private consumption, which has been a strong driver of growth in recent years, grew by only 3.1% in Q1 of FY2019 its lowest rate in more than 4 years. Urban consumption was likely affected by subdued wage growth and a credit crunch, while continued rural stress constrained rural consumption. Government consumption remained healthy, however, growing by 8.8%, the bank noted.

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