Asian Development Bank (ADB) said India will continue to be the fastest growing major economy, ahead of China, with a growth rate of 7.3 percent in 2018-19 and 7.6 percent in 2019-20.
On India, it said: “In sum, the GDP growth forecast for FY2018 (ending March 2019) is maintained at 7.3 per cent. Growth in FY2019 is expected to rise to 7.6 percent as measures are taken to strengthen the banking system bolster private investment and as benefits kick in from the goods and services tax. Any further increase in oil prices poses a downside risk to growth.”
ADB said India is the dominant economy in the South Asia sub-region with its growth gaining momentum at 7.7 percent in the last quarter ended March of 2017-18, the highest rate of growth since the first quarter of 2016-17.
This pushed full-year growth to 6.7 percent (2017-18), a tad higher than estimated in ADO 2018, largely driven by government spending for both consumption and public administration.
“In the first half of 2018-19, the growth rate is expected to benefit from a low base. Other key drivers of growth include an uptick in public consumption, which is typical before elections, and a recovery in exports following shortages of working capital related to a new goods and services tax,” according to the ADO supplement.
“South Asia, meanwhile, continues to be the fastest growing sub-region, led by India, whose economy is on track to meet the fiscal year 2018 projected growth of 7.3 per cent and further accelerating to 7.6 per cent in 2019, as measures taken to strengthen the banking system and tax reform boost investment,” it said further.
ADB Chief Economist Yasuyuki Sawada said, “Although rising trade tensions remain a concern for the region, protectionist trade measures implemented so far in 2018 have not significantly dented buoyant trade flows to and from developing Asia”.
He also said, “Prudent macroeconomic and fiscal policy-making will help economies across the region prepare to respond to external shocks, ensuring that growth in the region remains robust”.
The ADO supplement has factored in the tariffs imposed by July 15.
ADB also said, “The risk of further ratcheting up of protectionist measures could undermine consumer and business confidence and thus developing Asia’s growth prospects”.
“The upgrade in the 2018-19 inflation forecast for India from 4.6 percent to 5 percent responds to higher oil prices, a significant depreciation of the Indian rupee in the past few months, and generous increases announced on 4 July in minimum support prices for summer crops,” according to ADB.
For developing Asia, it has revised down inflation projections from 2.9 percent to 2.8 percent in 2018 and from 2.9 percent to 2.7 percent in 2019 citing domestic factors to help contain inflationary pressures.
“As the US monetary policy normalizes, central banks in the region act to spare their currencies’ sharp depreciation and to subdue inflation. Further, some governments have reintroduced subsidies to contain the effects of rising food and oil prices.”