The Asian Development Bank (ADB) has slashed India's GDP growth forecast for the current fiscal to 7% from 7.4% owing to weakness in private consumption, manufacturing output and business investment.
The 7% GDP growth expected in 2017-18 is lower than 7.1% recorded in 2016-17 and its earlier projection of 7.4% in July. ADB pencilled in 7.4% for 2018-19, down from the earlier forecast of 7.6% in July.
It was, however, bullish on growth gaining traction on reforms. "Private consumption is expected to pick up on the back of low inflation and anticipated wage hikes. Manufacturing is also likely to bounce back as the sector adjusts to the new tax regime," the multilateral lending agency said in an update on its Asian Development Outlook (ADO) 2017.
The ADB raised its forecast for Chinese economic growth to 6.7% in 2017 from 6.5% and upped its estimate for 2018 to 6.4% from 6.2%. India's growth fell to a 3-year low of 5.7% in the April-June quarter of 2017-18 "due to lingering effects from demonetisation and transitory challenges related to the new goods and services tax (GST) regime", it said.
"Weakness in private consumption, manufacturing output, and business investment has resulted in lowering the short- term growth outlook for the country," it added. On the June quarter dip in expansion, it said growth in private consumption and industry declined compared to previous quarters. Fixed capital formation grew by a sluggish 1.6%, indicating a sharp slowdown in private investment.