ADB Cuts India's GDP Growth Forecast For FY23 To 7% On High Inflation, Monetary Tightening

India's economy grew 13.5 per cent year-on-year in the first quarter of 2022-23, reflecting strong growth in services, ADB said in a supplement to its flagship ADO report

The Asian Development Bank (ADB) has slashed India's economic growth projection for FY22-23 to 7 per cent from 7.2 per cent earlier, citing higher than expected inflation and monetary tightening, the PTI reported on Wednesday.

India's economy grew 13.5 per cent year-on-year (yoY) in the first quarter of 2022-23, reflecting strong growth in services, ADB said in a supplement to its flagship ADO report on Wednesday.

"However, GDP growth is revised down from ADO 2022's forecasts to 7 per cent for FY22 (ending in March 2023) and 7.2 per cent for FY23 (ending in March 2024) as price pressures are expected to adversely impact domestic consumption, and sluggish global demand and elevated oil prices will likely be a drag on net exports," it said.

The ADO expects the Chinese economy to expand by 3.3 per cent in 2022 rather than the 5 per cent forecast earlier. Lockdowns from the zero-Covid strategy, problems in the property sector, and weaker external demand continue weighing on the economic activity in China, said the report. 

Meanwhile, India’s economic growth forecast for 2022 was slashed to 7.7 per cent by Moody’s Investors Service. The rating agency said that rising interest rates, uneven monsoon, and slowing global growth will dampen economic momentum on a sequential basis.

Moody’s in May had projected the country’s GDP to expand by 8.8 per cent this year. The GDP expanded by 8.3 per cent in 2021 and contracted by 6.7 per cent in 2020, the year when the pandemic struck India.

In its update to Global Macro Outlook 2022-23, Moody’s said the Reserve Bank of India (RBI) is likely to remain hawkish this year and maintain a reasonably tight policy stance in 2023 to prevent domestic inflationary pressures from building further.