ADB cuts India’s FY22 Economic Growth Forecast to 10 percent

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The Asian Development Bank (ADB) has downgraded India’s economic growth forecast for the current financial year to 10 percent on 20th July, from 11 percent projected earlier this year, mainly on account of the adverse impact of the coronavirus pandemic. India’s GDP growth recovered to 1.6 per cent in the last quarter of fiscal year ended March 2021, narrowing contraction in the whole fiscal year from 8 percent estimated in April to a revised 7.3 per cent, the multilateral funding agency said in the Asian Development Outlook (ADO) Supplement. Then a second wave of the pandemic induced many state governments to impose strict containment measures. New COVID-19 cases daily peaked at more than 4,00,000 in early May, then fell to a little over 40,000 in early July. Indian consumer price inflation rose to 6.3 per cent year-on-year in May as both food and fuel inflation outpaced expectations. “This Supplement raises the inflation forecast for India in FY2021 (fiscal ending March 2022) by 0.3 percentage points to 5.5 per cent while keeping the forecast for FY2022 at 4.8 per cent,” ADB said. The growth projection for FY2022 (ending in March 2023), by which time much of India’s population is expected to be vaccinated, is upgraded from 7 per cent to 7.5 per cent as economic activity normalises, said the Manila-headquartered funding agency. Meanwhile, the inflation forecast for Asia and the Pacific this year has been raised to 2.4 per cent, from 2.3 per cent in April, reflecting rising oil and commodity prices. The projection for 2022 remains at 2.7 per cent. For South Asia, the inflation forecast has been raised for 2021 to 5.8 per cent from 5.5 per cent, mainly reflecting a higher forecast for India. However, it has been kept unchanged at 5.1 per cent for 2022. On South Asia, ADB said, "The economic outlook for the sub region is dampened by new waves of COVID-19 hitting the sub region from March to June 2021. The adverse economic impact of these new waves is expected to be limited, with businesses and consumers better able to adapt to the pandemic and containment measures now than they were a year ago," it said. The GDP growth forecast for the sub region in 2021 is downgraded from 9.5 per cent in ADO 2021, to 8.9 per cent but upgraded for 2022, from 6.6 per cent to 7 per cent,” ADB said in the supplement. Lowering the growth projections for South Asia, Southeast Asia, and the Pacific for 2021, ADB said: “renewed outbreaks are met with containment measures and restrictions, hampering economic activity. Even as the pandemic persists, developing Asia is forecast to sustain its strong rebound broadly in line with the April forecasts of the ADO." Recovery is under way in developing Asia, but with the growth projection for this year revised down slightly from 7.3 per cent in the Asian Development Outlook 2021 in April, to 7.2 per cent following renewed virus outbreaks in some economies. The projection (developing Asia) for 2022 is upgraded from 5.3 per cent to 5.4 per cent, it added. ”Developing Asia” refers to a group of over 40 countries that are members of the ADB.