India’s inflation, the ADB said, remained more persistent than expected, and monetary policy eased sharply, reducing the purchasing power of consumers.
India’s inflation, the ADB said, remained more persistent than expected, and monetary policy eased sharply, reducing the purchasing power of consumers.
The Asian Development Bank (ADB) has lowered its 2022-23 growth forecast for India’s economy to 7% from 7.5% projected in April, calling it a “slight downward revision” driven by higher-anticipated inflation and monetary tightening. has contracted.
The bank raised its inflation forecast for India for this year to 6.7%, while raising its current account deficit (CAD) forecast to 3.8% of GDP. The CAD is expected to fall to 2.1% of GDP in 2023-24, while inflation will moderate to 5.8% as demand pressures eased by strengthening economic activity by easing supply constraints, the bank acknowledged.
Q1 growth of 13.5% reflected strong growth in services for India, but GDP growth forecasts were being revised downwards as price pressures are expected to adversely impact domestic consumption, And sluggish global demand and higher oil prices could put pressure on net exports. , said the bank. In 2023-24, ADB expects India to grow at 7.2%.
India’s inflation, the ADB said, remained more persistent than expected, and monetary policy tightened sharply, reducing consumer purchasing power. “Sticky core inflation will adversely affect spending over the next two years if wages fail to adjust,” it warned.
“Subsidised fertilizers and gas, free food distribution programmes, and excise duty cuts will help offset some of the effects of high inflation on consumers, but taxes on packaged food products will burden consumers already dealing with rising inflation. ,” noted adb update.
China’s concern
China’s economy will register lower growth than the rest of developing Asia for the first time in three decades, the bank said in an update to its Asia Development Outlook (ADO) on Wednesday, at 3.3% in 2022, married off an earlier 5% forecast. Due to the lockdown due to its zero-covid strategy, property sector woes and weak external demand.
For 2023, the Bank forecast a growth of 4.5% for China, compared to 4.8% previously estimated, due to ‘deteriorating external demand to reduce investment in manufacturing’.
South Asia
Lower growth is expected for India with sharp contraction in Sri Lanka, ADB said, with a slower growth rate for South Asia at 6.5% in 2022, 7% earlier projected and 6.5% in calendar year 2023, compared to its previous estimate In. of 7.4%. India accounts for 80% of the region’s economy.
While growth will be low, ADB expects inflation in South Asia to rise from higher energy and food costs to 8.1% in 2022 and 7.4% in 2023. Earlier inflation was projected to be 6.5% in 2022 and 5.5% in 2023. And that the upward revision reflects growth in global commodity prices primarily driven by inflation in India, Pakistan and Sri Lanka.
“The amendment mainly reflects the pattern of inflation in India. Headline inflation broke the monetary policy target of 2%-6% in the first quarter of 2022-23, fueled by rising food prices and rising pressure on global oil and commodity prices following the Russian invasion of Ukraine,” the bank said.