Asian Development Bank has published Asian Development Outlook 2019.In this,ADB has cut India’s growth forecast to 7.2% for 2019-20 because of a slower-than-expected pickup in investment demand.The growth rate in Financial Year 2020-21 is likely to be 7.3%.
ADB has also mentioned that India will remain the fastest growing major economy, as China is projected to grow at 6.3% in 2019.
India’s strong growth is because of (a)Strong household spending such as Income support to farmers,hikes in procurement prices for food grains and tax relief to taxpayers earning less than Rs 5 lakh,declining fuel and food prices and (b)Strong corporate fundamentals such as increase in utilization of production capacity by firms,falling levels of stressed assets held by banks and easing of credit restrictions on certain banks,is expected to help investment grow at a healthy rate.
However,there are some areas of concern.According to the report, downside risks to growth include (a)higher-than-expected moderation in global demand (b)potential escalation of trade tensions (c)Lower-than-targeted tax revenues and (d)delay in strengthening bank and corporate balance sheets could also undermine economic expansion.
Further,imports are expected to rise mainly due to stronger domestic demand while a growth slowdown in India’s key export destinations would dent export growth.
The report also says that the current account deficit is expected to widen a bit to 2.4% of GDP in Financial year 2019 and 2.5% of GDP in Financial year 2020.However,the deficit is expected to be financed comfortably by capital flows,given that India has emerged as an attractive destination for foreign investment.
The Asian Development Bank (ADB) is a regional development bank established on 19 December 1966.ADB is headquartered in Manila, Philippines.It aims to promote social and economic development in Asia. ADB has 67 members,of which 48 are from within Asia and the Pacific and 19 outside.Japan holds the largest proportion of shares in ADB followed by the USA.ADB is also an official United Nations Observer.