The Asian Development Bank (ADB) has slashed India's economic growth projection for 2022-23 to 7 per cent from 7.2 per cent earlier, citing higher than expected inflation and monetary tightening.
India's economy grew 13.5 per cent year-on-year in the first quarter of 2022-23, reflecting strong growth in services, ADB said in a supplement to its flagship Asian Development Outlook (ADO) report on Wednesday.
"However, GDP growth is revised down from ADO 2022's forecasts to 7 per cent for FY2022 (ending in March 2023) and 7.2 per cent for FY2023 (ending in March 2024) as price pressures are expected to adversely impact domestic consumption, and sluggish global demand and elevated oil prices will likely be a drag on net exports," it said.
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The ADO expects the Chinese economy to expand by 3.3 per cent in 2022 rather than the 5 per cent forecast earlier. Lockdowns from the zero-COVID strategy, problems in the property sector, and weaker external demand continue weighing on the economic activity in China, said the report.
For developing Asia and the Pacific, it has cut the region's economic growth to 4.3 per cent from an earlier forecast of 5.2 per cent on mounting challenges due to increased monetary tightening by central banks, fallout from the Russian-Ukraine war, and recurrent COVID-19 lockdowns in China.
For next year, the growth forecast for the region has been lowered to 4.9 per cent from 5.3 per cent, while raising the inflation forecast. East Asia and South Asia account for most of the downgrade.
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South Asia, the sub-region India belongs to, is expected to grow at 6.5 per cent in 2022 from 7 per cent projected earlier. For 2023, it has been revised down to 6.5 per cent from 7.4 per cent.
"This reflects modest downward revisions to India's forecast on higher-than-anticipated inflation and monetary tightening, and Sri Lanka's sharp contraction caused by its sovereign debt and balance-of-payment crises," the ADB report said.
Excluding China, the rest of developing Asia is projected to grow at 5.3 per cent in both 2022 and 2023, it said. Developing Asia comprises the 46 members of ADB from subregions -- Caucasus and Central Asia, East Asia, South Asia, Southeast Asia and the Pacific.
"Developing Asia continues to recover, but risks loom large," said ADB Chief Economist Albert Park.
A significant downturn in the world economy would severely undermine demand for the region's exports.
"Stronger-than-expected monetary tightening in advanced economies could lead to financial instability. And growth in the PRC faces challenges from recurrent lockdowns and a weak property sector. Governments in developing Asia need to remain vigilant against these risks and take the necessary steps to contain inflation without derailing growth," Park said.
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