The Asian Development Bank (ADB) has sharply scaled down its projection for India's economic growth to 5.1 per cent in 2019-20 from 6.5 per cent projected earlier because of the crisis in the non-banking finance companies and impact on consumption due to rural distress and a dismal job scenario.
The ADB said growth would pick up to 6.5 per cent in 2020-21 with "supportive" policies, but also said it would be lower than its earlier forecast of 7.2 per cent for the fiscal year.
The growth forecast, given in ADB's supplement to the Asian Development Outlook 2019, would make India lose the tag of the fastest growing large economy to China this fiscal year.
China is projected to grow at 6.1 per cent in 2019-20 against ADB's earlier forecast of 6.2 per cent due to trade tensions and a slowdown in global activity coupled with weaker domestic demand.
India is expected to again take over China next fiscal year, as the latter is projected to grow by 5.8 per cent then against 6 per cent estimated earlier.
The ADB cut India's growth rate by much higher rate than China's despite the fact that the latter is affected by trade war with the US.
ADB's projection for India's economic growth in FY20 is almost in line with the Reserve Bank of India's. The central bank has projected India to grow by 5 per cent during the fiscal year.
India's economy expanded by 5 per cent in the first quarter and 4.5 per cent in the second quarter of the current fiscal year.