ADB Retains India's Growth Estimate At 7.3% For Current Fiscal, Highlights Lower Rural Consumption

The Asian Development Bank (ADB) has kept India's growth forecast at 7.3% for the current fiscal and 7.6% in the next year. India is maintaining growth momentum on rebounding exports and higher industrial and agricultural output, ADB said today in its Asian Development Bank Outlook Supplement. India saw GDP growth moderate to 7.1% in Q2 of FY2018 (ending March 31, 2019) from 8.2% in Q1, ADB noted. The slowdown came mainly from food prices, lower rural consumption, rising oil prices delivering a negative shock in terms of trade, and rising costs for raw materials.

While a gradual slowdown across the quarters in FY2018 was forecast, the slowdown in Q2 was a bit steeper than anticipated. Nonetheless, growth forecasts are retained despite some downside risks: tighter credit as the nonbank finance sector experiences stress, limited fiscal space for public capital expenditure, and escalating trade tensions. Some of these risks could be offset by a recent decline in oil prices and by exports becoming more competitive as the Indian rupee weakens, down by 10% since the beginning of 2018 despite a recent rebound, according to the ADB.

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