New Delhi, Oct. 2: The Asian Development Bank (ADB) has lowered India’s growth projection for 2013-14 to 4.7 per cent from 6 per cent earlier, stating that the recent rupee depreciation and capital outflows could adversely impact the economy.
The downward revision comes less than a month after the Prime Minister’s Economic Advisory Council cut the growth forecast for the current fiscal to 5.3 per cent from 6.4 per cent projected earlier.
“With gross domestic product in the first quarter (of 2013-14) expanding at its slowest pace since the global financial crisis, the ADB has revised its growth forecast to 4.7 per cent from 6 per cent projected in April,” the bank said in its Asian Development Outlook 2013.
The Reserve Bank of India has also lowered the growth projection for 2013-14 to 5.5 per cent from its earlier estimate of 5.7 per cent.
However, confident that growth will improve in the second quarter, economic affairs secretary Arvind Mayaram yesterday said the economy would expand over 5 per cent in the current fiscal on the back of high farm output and promised steps to boost growth.
Presenting a sobering picture of India’s outlook, the ADB report said the economy had been under pressure with the recent depreciation in the rupee and capital outflows adding to structural constraints which were weighing heavily on its prospects for returning to a high growth path.
In 2014-15, there could be some moderate improvement, with growth estimated at 5.7 per cent, but below the previous forecast of 6.5 per cent, the ADB said.
“The recent financial market turbulence is a timely reminder of the need for structural and fiscal reform not only to ensure long-term growth but also to keep financial markets stable in the short run,” said ADB chief economist Changyong Rhee.
Nevertheless, the ADB said the government had taken a number of steps to address the financial market concerns to revive growth prospects, besides expanding the bilateral swap arrangement with Japan to $50 billion from $15 billion.
The government also indicated its intention to prop up the rupee’s stability by deepening financial markets and easing external financing constraints.
Apart from these measures, proper macroeconomic policies should be also continued, the report said.
ADB has scaled down this year’s growth forecast for China to 7.6 per cent from the previous estimate of 8.2 per cent because of weak domestic demand, softening industrial rebound and a sharp downturn in foreign trade.
In April, the ADB had predicted the Chinese economy would grow at 8.2 per cent. However, it had cut its forecast to 7.7 per cent in July.