ADB lowers India's GDP growth projection for this fiscal to 10 pc on COVID disruptions

Asian Development Bank (B) has lowered India's growth projections for current financial year by a percentage point to 10 per cent, mainly due to disruptions in economic activity caused by second wave of COVID-19 pandemic.

In April, B h projected a growth rate of 11 per cent in 2021-22 for India.

In its update of Asian Development Outlook (O) released on Wednesday, multilateral lending agency has also trimmed growth forecast for Asia as a region from 7.3 per cent to 7.1 per cent for 2021, though it retained growth projections for China at 8.1 per cent.

" growth forecast for India in fiscal year 2021 (ending March 2022) is revised down, as May's spike in COVID-19 dented recovery. outbreak, however, dissipated faster than anticipated, resulting in several states easing lockdown measures and returning to more normal travel patterns," said O Update (OU) 2021.

economy is expected to rebound strongly in remaining three quarters of FY2021, and grow by 10 per cent in full fiscal year, before moderating to 7.5 per cent in FY2022 (fiscal ending March 2023), B said.

Reserve Bank of India (RBI) also trimmed India's economic growth projection by a similar margin to 9.5 per cent in June this year.

forecast, for 12 months ending March 31, 2022, takes into account disruptions in economic activity caused by second wave of coronavirus disease (COVID-19) pandemic, which versely impacted services, domestic consumption, and urban informal sector, B said.

Because consumption will recover only grually, government spending and exports will contribute more to FY2021 than y did in previous fiscal, it said.

" Indian economy is showing encouraging signs of recovery as effects of second wave dissipate. government's vaccination drive, its new fiscal stimulus package, and initiatives to free more resources for infrastructure development, along with measures to strengn health-related interventions, are helping speed up recovery," Takeo Konishi, B Country Director for India, said.

About South Asia, comprising Afghanistan, Banglesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, update said outlook varies across subregion.

" subregion is projected to expand more slowly this year than earlier projected, but faster next year. While India's drives forecast, growth rates will vary across economies. As well as for India, this Update revises down 2021's forecasts for Banglesh and Nepal, both grappling with anor resurgence in COVID-19 cases." However, China will remain strong, despite a protracted recovery in household consumption. " GDP growth forecast remains unchanged at 8.1 per cent in 2021, and 5.5 per cent in 2022, as a solid export performance and higher fiscal support in second half of 2021 keep growth on track," as per B's estimate about China.

Even as COVID-19 cases increase in China, grual recovery in consumption is expected to continue, buttressed by improvements in job market and consumer confidence.

contributions of net exports and investment to China's growth, supported by healthy tre dynamics, are also expected to increase this year, before moderating in 2022, it said furr.

B said pandemic is clouding developing Asia's economic prospects despite rebound in exports demand and revival in global demand.

"Renewed COVID-19 outbreaks since July are slowing growth momentum in some parts of region. recovery has been weaker in economies hit by domestic outbreaks and those facing weak demand for ir key industries such as tourism-dependent economies," B said.

Developing Asia comprises 46 members of B.

rebound in Developing Asia is expected to be a bit weaker than O 2021's forecast. Regional GDP is expected to expand by 7.1 per cent this year, a marginal downward revision from earlier projection of 7.3 per cent, it said.

"Regional growth this year will be characterized by slower-than-expected expansions in South Asia and Souast Asia, a slight contraction in Pacific and faster recoveries in East Asia and Central Asia." B said strong growth in vanced economies will continue supporting recovery in global tre.

"Rapid vaccine rollouts in se economies have reduced incidence of severe cases, hospitalizations, and deaths during resurgence of COVID-19 infections," as per update.

Growth in US, Euro area, and Japan will remain robust in 2022 with GDP likely to grow by 3.9 per cent on an average.

On price front, B said inflation has moved up in some economies in Asia due to rising energy and food prices as well as exchange rate depreciation.

"But it neverless remains close to targets of central banks across region, excluding Central Asia. Against this backdrop, fiscal and monetary policies continue to be accommodative and financial conditions remain robust," OU 2021 said.

India's Reserve Bank has projected retail inflation at 5.7 per cent in current fiscal year on account of supply-side impediments, firm crude oil prices and higher cost of raw materials. RBI takes into account retail inflation as a key input to decide its monetary policy every two months.