India slashes GDP forecast

India lowered its economic growth outlook for 2015-16 to 7-7.5% in a mid-year review Friday, blaming a weak global economy that has hurt demand for exports.

The government’s earlier forecast said real GDP, which strips out the effect of inflation, would grow by 8.1-8.5% for the full financial year ending in March.

But falling global demand has led to a steep drop in India’s exports, which in November fell for the 12th straight month, down 24% year-on-year.

Four successive years of drought and an unexpectedly poor monsoon this year have also severely hurt the agriculture sector, on which more than half of India’s 1.2 billion people depend for a living.

“The forecast of 8-8.5% won’t be realised,” the government’s chief economic adviser Arvind Subramanian told reporters in New Delhi. “Demand has been much weaker for the future than we anticipated.”

Sharply lower exports constituted the “big difference” with predictions laid out in the February budget, he said, adding that private investment remained weak.

Net energy importer India received a windfall from a steep drop in oil prices this year, but even if crude prices remain at current levels, the benefits next year will be less pronounced, said Mr Subramanian.

Asia’s third-largest economy expanded 7.4% in the second quarter of the financial year, according to figures last month, outperforming China and making it the world’s fastest-growing major economy.