The Asian Development Bank (ADB) on Wednesday lowered India's 2017 economic growth forecast to 6.7% from the earlier 7%, saying recovery in the Indian economy was stifled due to rising global crude price and subtle private investment.
"Owing to tepid growth in the first half of 2017-18, the lingering effects of demonetisation, transitory challenge of new tax system and some risk to agriculture stemming from spotty monsoon in 2017, the economy is now expected to grow by 6.7%, slower than 7% forecast in the September update," ADB said.
For 2018-19, India's GDP is projected to grow by 7.3%, slower than ADB's previous estimate of 7.4%.
The downgrade in projection comes weeks after Indian economy reversed a five-quarter slide in GDP growth to clock a 6.3% expansion in July-September.
In its Asian Development Outlook Supplement, ADB said growth is expected to pick up in the remaining two quarters of the fiscal ending March 31, 2018, as "the government implements measures to ease firms' compliance with the new goods and services tax (GST)".
Growth would also be supported by government efforts to improve balancesheets of state-owned banks, in part through an augmented bank-recapitalisation programme and a supportive global environment.
For the next fiscal, the projections have been revised down "mainly because a faster recovery in crude oil prices likely in 2018 will add fiscal pressure, and because private investment growth is expected to remain soft", it said.
ADB said inflation in India remained subdued in the first seven months of 2017-18, averaging 2.7%, with low food prices and demand still not out of the woods because of demonetisation.
"However, inflation has picked up since July 2017 on a price uptick for food, especially pulses and vegetables. Fuel prices also inched up in response to rising global crude oil prices," it said.
For neighbouring China, the bank, however, raised its growth estimates for 2017 to 6.8% from the earlier 6.7%.
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