ADB cuts India's FY20 GDP growth forecast to 6.5%

Last Updated: Thu, Sep 26, 2019 15:15 hrs
Asian Development Bank (Image Courtesy: ADB)

New Delhi: The Asian Development Bank (ADB) has revised its outlook for India's GDP growth for the financial year 2019-20 to 6.5 per cent from the previous projection of 7 per cent due to domestic reasons such as the pre-election decline in investment and tighter credit conditions.

However, the Manila-based bank in its supplement to the Asian Development Outlook (ADO) released on Wednesday said that the growth may improve in FY 2020-21 to 7.2 per cent.

"India's growth forecast for fiscal year 2019-20 is lowered to 6.5 per cent after growth slowed markedly to 5 per cent in the first quarter, April-June," the ADB said.

"India is expected to rebound to 7.2 per cent growth in fiscal 2020-21 and join<br>most other subregional countries in performing at or near their ADO 2019 growth<br>forecasts for the next year," it said.

Besides, the Manila-based bank said the contribution of investment in India's growth fell substantially because of subdued bank lending and uncertainty ahead of elections in April-May.

The revised forecast comes a month after official data showed that severe slowdown in manufacturing activity in the country pulled India's GDP growth rate in the first quarter (Q1) ended June 30 down to 5 per cent, marking the fourth successive quarter of decline in growth.

From 8 per cent in Q1 of 2018-19 to 5 per cent in this quarter, the GDP has fallen by 3 per cent in barely a year's time.

On a sequential basis, the growth rate came lower than the 5.8 per cent in Q4 of 2018-19.

Currently, a culmination of factors such as high GST rates, natural calamities, subdued farm produce prices, stagnant income levels and low job generation have led to the slowdown.

Various sectors are facing a sales downturn. Industries such as fast-moving consumer goods (FMCG) and automobiles have been the hardest hit.