Asian Development Bank cuts growth forecast for India to 5.6%

NEW DELHI: In line with a barrage of downgrades over the last few months by various rating agencies, the Asian Development Bank on Wednesday slashed its growth forecast for India to 5.6% this fiscal compared to 7% reported earlier, citing sluggish global demand and low agricultural production due to weak monsoon.

Recently, India has suffered growth revisions from all quarters with a majority of private analysts revising the growth in the range of 5.5%.

Adding to market woes, even the Prime Minister's Economic Advisory Council confirmed the growth crawl and pegged it 6.7% down from 7.6% assessed in February.

"The delayed monsoon, coupled with weaknesses in the agricultural supply chains and rising costs of fertilizers and irrigation, are likely to result in subdued agricultural growth and sustain pressure on food prices," the ADB report stated.


The GDP growth in the first quarter this fiscal (April-June) was a mere 5.5% way lower than 8% recorded in same period in 2011-12.

However, the report takes note of the recent reform initiatives taken by the economy.

"India can start reversing this trend by improving its investment climate and expediting reforms," said ADB Chief Economist Changyong Rhee."... restoring investor confidence can help jump start critical infrastructure projects that could get the economy moving."

In September, the government took tough steps to curtail the subsidy bill by raising diesel prices by Rs 5/ litre, and opened up the FDI route for sectors such as aviation, retail.