NEW DELHI: Asian Development Bank (ADB) on Thursday lowered the growth forecast for India from 7.2 to 7 per cent for the current fiscal, due to moderation in growth prospects for the advanced economies which could adversely affect tradable services.
ADB, however, maintained that India would continue to remain the fastest growing major economy ahead of China.
Releasing its update on the Asian Development Outlook (ADO) 2019, it said China will grow at 6.3 per cent in 2019, and slip further to 6.1 per cent in 2020, mainly on account of continuing trade war with the US.
India's economic growth, it said, is expected to inch up again to 7.2 per cent in FY2020 (2020-21), helped by recent reforms to improve the business climate, strengthen banks, and relieve agrarian distress, ADB said in the supplement.
Notably, the 7.2 per cent economic growth projection in April this year was also curtailed from ADB's earlier projection of 7.6 per cent for the current fiscal ending March 2020.
Giving reasons for reducing the growth projection, the update said it could be owing to moderation in growth in advanced economies and due to the impact of slowdown in growth in 2018-19.
"The GDP growth forecast for FY2019 (fiscal to be ending in March 2020) is revised down from the ADO 2019 forecast of 7.2 per cent to 7 per cent, mainly reflecting the unexpectedly weak FY2018 (2018-19) outturn," said the ADB supplement to the ADO 2019.
Also, it added, "moderation in growth prospects for the advanced economies could adversely affect tradable services, this drag on growth mitigated by a more competitive currency and benign oil prices."
Referring to the slowdown in economic growth in the last quarter of financial year 2018-19, ADB said, the slowdown was broad-based with private consumption and investment growth slowing down.
On the supply side, agriculture and manufacturing grew more slowly as services picked up a bit.
ADB said the US decision to end the preferential trade treatment will have minimal effect as it benefited only 1.8 per cent of all Indian exports.
"Agriculture is expected to grow at a healthy rate in 2019-20, as current weather trends indicate a normal monsoon.
The funding agency further said the economic outlook for South Asia remains robust.
"Growth is projected at 6.6 per cent in 2019 and 6.7 per cent in 2020, albeit a tad lower than forecast in ADO 2019, in line with downgrades for India," ADB said.
For the developing Asia, ADB has maintained a strong but moderating growth in line with April forecasts, even as trade conflict continues between the US and China.
The regional (developing Asia) gross domestic product (GDP) is forecast to expand by 5.7 per cent in 2019, as unexpectedly strong growth in Central Asia offsets small downgrades for East, South, and Southeast Asia in 2019, said the ADO 2019 Supplement.