ADB lowers India's growth forecast to 7.2% for FY23 due to surging food, fuel prices

The Asian Development Bank (ADB) on Thursday brought down its FY23 growth forecast for India to 7.2% percent, from 7.5% percent in April this year.

The Bank attributed the revised forecast to surging food and fuel prices in India. This can further be linked to ongoing geo-political tensions and supply-chain disruptions worsening the economic conditions.

According to the report, "a worsening fallout from the war in Ukraine could lead to a further surge in global energy and commodity prices, with likely knock-on effects on growth and inflation in developing Asia."


Furthermore, the resurfacing Covid fears in India might take a toll on the demand side. The high inflationary pressures might end up affect the consumer purchasing power, said the report.

Adding to these worries is the strengthening of US dollar against INR. It is likely to generate more uncertainties for the India. The report by ADB said that the tightening of financial conditions might result in softening of growth.

The inflation rate came in India came in at 7.01% in June and remained above the Reserve Banks' tolerance band (2-6%) for the sixth consecutive month. This might invite further rate hikes by the RBI to tame inflation.

Inflation in most of the Asian countries is increasing at a rapid rate. In countries like Mongolia, Pakistan, Sri Lanka, Laos and Myanmar, the inflation rate has been in double-digits.

For the Asia region, the ADB revised its growth forecast for FY23 to 4.6%, from 5.2% earlier, due to ongoing geo-political tensions and supply-side issues. It also increased its inflation projection to 4.2 percent, from 3.7 percent, due to surging food and fuel prices.

"A substantial slowdown in global growth could hurt exports, manufacturing activity and employment prospects, and cause turbulence in financial markets," stated the report.