The Asian Development Bank marginally lowered its growth forecast for India on account of demonetisation, sluggish consumption and low investment in the economy.
In its latest outlook, the Manila-based multilateral agency said growth will moderate to 7% in 2017, from 7.4% estimated earlier, before picking up to 7.4% next year. It said the “transitory challenges temper India's strong growth prospects“. The revision is based on the slowdown in the first quarter of the current financial year, when the Indian economy expanded 5.7%, the slowest pace of growth in three years.
While ADB blamed demonetisation for some of the woes, it expects the move to result into gains in the future. However, short-term disruption is expected to dissipate, allowing these initiatives to generate growth dividends over the medium term. The agency also lowered its inflation projection for the year to 4%, from 5.2% earlier, and expected a mild pick-up in the pace of price rise in 2018 with inflation estimated at 4.6%.
Developing Asia is on track to grow faster this year and next, ADB said, buoyed by a pick-up in world trade and China's expansion, but it flagged risks from tightening US monetary policy. Developing Asia is expected to grow by 5.9 and 5.8% in 2017 and 2018, respectively. That is unchanged from its July estimates, but higher than the 5.7% forecast it gave for both years in its outlook released in April.