ADB trims India’s FY22 growth forecast to 10%

The Asian Development Bank (ADB) has cut India’s growth projection for 2021-22 (FY22) to 10 per cent, from 11 per cent, taking into account the adverse impact on services, domestic consumption, and the urban informal sector due to the second wave of the Covid-19 pandemic.

The downward revision in growth forecast has been a result of India’s economic recovery getting impacted due to a spike in Covid cases in May, the agency said in its Asian Development Outlook 2021 report.

However, the outbreak dissipated faster than anticipated, with several states easing lockdown measures, it said.

“The economy is expected to rebound strongly in the remaining three quarters of FY2021 (April 2021March 2022), and grow by 10 per cent in the full fiscal year before moderating to 7.5 per cent in FY2022 (April 2022March 2023). Because consumption will recover only gradually, government spending and exports will contribute more to FY2021’S growth than they did in the previous fiscal year,” the multilateral agency said.

The economic rebound in the last three quarters of the current fiscal year is estimated based on improvements in electronic waybills, mobility data, and the purchasing managers’ index.

Private consumption and investment are projected to remain weak due to the pandemic’s impact on household incomes, spending capacity, and lending. However, the government’s plan to monetise assets through its National Monetisation Pipeline is expected to drive public investment to boost infrastructure development, the report said.

“Growth in the agriculture sector will remain resilient, yet marginally lower, with the pandemic’s spread into rural areas and a delayed monsoon,” the report by ADB said.

In its previous outlook, released in April, ADB had projected India’s growth at 11 per cent for the ongoing fiscal year. For the next fiscal year, it had estimated India’s growth at 7 per cent.