ADB lowers India's growth forecast to 7.2% for FY23; FICCI also predicts drop

The Asian Development Bank (ADB) on Thursday brought down its FY23 growth forecast for India to 7.2 per cent, from 7.5 per cent this April. The Bank attributed the revised forecast to surging food and fuel prices in the countr.

This can further be linked to ongoing geo-political tensions and supply-chain disruptions worsening the economic conditions. One of the supplements that higher-than-expected inflation will erode consumer purchasing power. Its effects will be seen in the provision of fertilizer and gas subsidies.

“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,” said the ADB report. The re-emergence of COVID fears would further erode demand, it take a toll on the demand side. The high inflationary pressures might end up affect the consumer purchasing power, said the report.

The strengthening of the US dollar against rupee could worsen the situation for India, said the ADB report, as it would increase the uncertainties. It observed that the nation’s inflation rate had hit 7 per cent in June and remained above the RBI’s tolerance band of 2 to 6 per cent. This might also spur rate hikes by the RBI to curb inflation.

In April, the Bank forecasted that India’s economy would grow 7.5 per cent in FY23 owing to increased public investment in infrastructure and a pickup in private investment.

Also Read: Indian economy to grow by 7.1 -7.6 % in current fiscal: Report

FICCI cuts forecast to 7%

The Federation of Indian Chambers of Commerce and Industry’s (FICCI) quarterly survey released on Thursday said that the war in Ukraine in all likelihood will keep the inflation rate high.

The Indian economy is expected to expand 7 per cent in fiscal 23, slower than a previous estimate of 7.4 per cent and the RBI’s 7.2 per cent projection, according to a survey by  FICCI. It further predicted that the RBI will hike the repo rate once again, to 5.65 per cent, by the end of the fiscal.

Apart from the major risks to India’s economy including rising commodity prices, supply-chain disruptions, the industry body also predicteds that a slowdown in India’s biggest trading partner, China, will also adversely affect exports.

Morgan Stanley survey has also lowered its forecast for India’s growth economy rate, bringing it down to 7.2 per cent from 7.6 per cent this week.