ADB lowers India’s economic growth forecast for 2019

The Asian Development Bank (ADB) on Wednesday lowered India’s economic growth forecast to 7.2% in 2019 from 7.6% earlier and said a deteriorating trade conflict between China and the United States could undermine investment and growth in developing Asia.

India’s economic growth slowed from 7.2% in fiscal 2017 to 7.0% in 2018, with weaker agricultural output and consumption growth curtailed by higher global oil prices and lower government expenditure.

“Growth is expected to rebound to 7.2% in 2019 and 7.3% in 2020 as policy rates are cut and farmers receive income support, bolstering domestic demand,” ADB said in its Asia Development Outlook, 2019.

Growth in India is forecast to pick up a bit to 7.2% in 2019 and 7.3% in 2020 on recovery in agriculture and stronger domestic demand with reform having strengthened the health of banks and corporations, and as

the implementation of a value-added tax makes domestic firms and products more competitive.

It said the recent policy measures by the government to improve the investment climate and boost private consumption and investment will help India to lift economic growth in the next two fiscal years. ADB projection is slightly higher than projections by other agencies which estimated growth rate between 7 and 7.1%.

India’s growth will be backed by strong household spending, Yasuyuki Sawada, Chief Economist at ADB said adding that this country has a golden opportunity to cement recent economic gains by becoming more integrated in global value chains. “The country’s young workforce, an improving business climate, and a renewed focus on export expansion all support this,” he mentioned.

Consumer price inflation is expected to rise to 4.3% in FY 2019 and 4.6% in FY20 as food costs increase slightly and domestic demand strengthens, the multilateral agency said.

The report also warned policy makes to be vigilant in uncertain times when abrupt increases in US interest rates appear to have ceased for the time being.