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Current Affairs

ADB lowers India’s growth projection for FY20 to 7.2%

Date: 04 April 2019 Tags: Basics of Economics

Asian Development Bank (ADB) in its recently released Asian Development Outlook (ADO) 2019 has lowered growth forecast of India for 2019-20 fiscal to 7.2% from 7.6% estimated earlier. The downgrade is attributed to moderation in global demand and likely shortfall in revenue on domestic front. However, India will remain one of the fastest-growing major economies in 2019-20

ADB Projections

  • For 2018-19, ADB has cut growth estimate to 7% from 7.3% projected in December 2018.
  • The reasons for growth cut are weaker agricultural output and consumption growth curtailed by higher global oil prices and lower government expenditure.
  • Growth is expected to rebound to 7.2% in 2019 and 7.3% in 2020 as policy rates are cut expected and farmers receive income support, bolstering domestic demand.
  • This growth will reverse two years of declining trend as reforms to improve business and investment climate take effect.
  • However, India’s growth faces some downside risks such as moderation in global demand as financial conditions tighten, uncertainty arising out of global trade tensions, and the weak economic outlook in industrial countries.
  • On the domestic front, growth could suffer if tax revenue falls short or any disruption affects ongoing resolution of twin problems of bank and corporate balance sheets/

Asian Development Bank (ADB)

  • It is multilateral lending agency based in Manila, Philippines. It was established on 19 December 1966.
  • It is collectively owned by its members. It has total 67 members – 48 from Asia-Pacific region (including India) and 19 from outside.
  • It is modeled closely on World Bank and has similar weighted voting system where votes are distributed in proportion with members' capital subscriptions.
  • It envisions prosperous, inclusive, resilient, and sustainable Asia and Pacific, while sustaining its efforts to eradicate extreme poverty in the region.
  • It assists its members, and partners, by providing loans, technical assistance, grants and equity investments to promote social and economic development
  • It provides finance to both sovereign countries as well as to private entities. It provides soft loans to poorer countries and hard loans to middle-income countries.
  • Most of its lending is concentrated in five operational areas viz. education, environment, climate Change & disaster management, finance sector development, regional cooperation & integration and private sector lending.