ADB dashes Budget hopes of 7.6% growth in 2012-13

The Asian Development Bank (ADB) does not expect India’s economy to grow at 7.6 per cent this financial year, as was assumed by the finance ministry in the Budget. The bank has pegged growth at just seven per cent, slightly above the estimated 6.9 per cent in the previous financial year and only 0.3 percentage points higher than growth in the crisis period of 2008-09.

In its Asian Development Outlook 2012 report, released on Wednesday, the Manila-based multilateral agency said investments were likely to remain lacklustre for some time in India. And, fiscal slippages, along with continued policy logjams on long-standing issues, would prove detrimental to the economy.

 

Finance ministry officials described ADB estimates as cautious and made in the context of an uncertain global environment. They stuck to the growth projection of 7.6 per cent for this financial year, subject to implementation of decisions like reforms in the petroleum sector, besides a normal monsoon.

The ADB report suggested risks on the external front remained, as the global economy remained fragile and any worsening of the situation in the euro zone and the high global oil prices might have an adverse impact on India. 

Growth projections for 2012-13
	GDP growth projection in %
Finance ministry	7.6
Asian Development Bank	7.0
World Bank	7.0-7.5
Prime Minister’s  Economic Advisory Council	7.5-8.0

The ADB has pegged economic growth at 7.5 per cent for the next financial year as well. The Economic Survey had projected the Indian economy to grow 8.6 per cent in the next financial year.

This is the first report on the state of India’s economy by any multilateral agency after the Budget was tabled in Parliament on March 16. It also comes a few days ahead of the Reserve Bank of India’s annual monetary policy for this financial year, slated for April 17, when the central bank would give its projections for economic growth.

Changyong Rhee, ADB’s chief economist, said, “An expected easing in monetary policy after a long period of persistent inflation and rate rises might help stimulate investment over the coming year, but its impact is likely to be limited until obstacles like land purchase and environmental regulations, which are currently deterring both domestic and foreign investors, are addressed.”