GDP growth forecast lowered slightly to 7.3% from 7.4% for FY2019
The Asian Development Bank (ADB), in a supplement to its Asian Development Outlook Update 2017 report has lowered India's GDP growth forecast to 6.7% for FY2018 from 7% forecast in the Update. Although the strong manufacturing expansion helped the economy reverse 5 consecutive quarters of deceleration in the second quarter of fiscal year 2018, the recovery is more subdued than assumed earlier due to rising crude oil prices, soft private investment growth, and weather-related risks to agriculture, say ADB. The tepid growth in the first half of FY2018, the lingering effects of demonetization in November 2016, transitory challenges of a new tax system also impacts the economic growth in FY2018.The growth projection for FY2019 is revised down to 7.3% from 7.4% 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.
GDP growth in India, the largest economy in South Asia, rebounded to 6.3% in the second quarter of FY2018 from 5.7% in the first, reversing 5 consecutive quarters of deceleration. The pickup was led by manufacturing, which grew by 7.0% as retailers restocked shelves depleted ahead of the implementation of a goods and services tax in July 2017, and as exports expanded and the performance of private corporations improved. Investment grew by 4.7%, the highest rate in 5 quarters, but still trailed GDP growth.
Agriculture remained subdued as the summer harvest fell from the previous year. Construction growth was tepid. Growth in services moderated in line with weak growth in bank deposits and credit, as well as restrained growth in public services as the government pulled back spending to meet its fiscal deficit target. Private consumption also grew at a slower pace of 6.5% as urban consumer sentiment stayed weak.
Growth is expected to pick up in the remaining 2 quarters of FY2018 as the government implements measures to ease firms' compliance with the new goods and services tax and as it works to improve the balance sheets of government-owned banks, in part through an augmented bank-recapitalization program - and thanks to a supportive global environment.
Powered by Capital Market - Live News
Disclaimer: No Business Standard Journalist was involved in creation of this content
