ADB lowered India’s Growth Forecast for 2016 from 7.8% to 7.4%

Asian Development Bank (ADB) on 22 September 2015 lowered India’s gross domestic (GDP) growth projections for the fiscal year (FY) 2016 to 7.4 percent from 7.8 percent projected in its March 2015 Outlook.

For FY2015, Indian economy growth is forecasted at 7.8 percent which is lower than the earlier forecast of 8.2 percent.

The causes for the lowering of growth projections has been the economic slowdown in industrial countries, weak monsoon, and stalled action of some key structural reforms.

However; there are few upsides that may give help the economy to bounce back and they are:
Inflation is trending down: The report projects inflation to average 5 percent in FY2015, rising to 5.5 percent in FY2016, on improved growth and an uptick in commodity prices. Continued soft consumer prices will help Reserve Bank of India (RBI) in further reducing interest rates in the second half of FY2015. The positive impact of monetary easing on the real economy would be strengthened with further headway on economic reforms.

Tax revenue: Healthy growth in tax revenue, along with higher than usual asset sales, allowed the government to increase growth enhancing capital expenditure by a robust 39.0 percent.

Net Foreign Direct Investment (FDI) inflows: Net foreign direct investment (FDI) inflows touched 10.2 billion US dollars in the first quarter of FY2015, a year-on-year rise of more than 29 percent, net portfolio inflows turned negative.

Current Account Deficit: In FY2015, it has been projected to remain at 1.1% of GDP, well below the highs of recent years. This happened on account of slow growth in industrial economies and the weakening of currencies of some of India’s major trading partners. In FY2016, a recovery in oil prices and improved industry and investment demand should see both imports and exports pick up, with the current account deficit seen increasing slightly to 1.5% of GDP.

Asian Development Bank (ADB)
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2014, ADB assistance totaled 22.9 billion US dollar, including co-financing of 9.2 billion US dollar.

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