The Asian Development Bank (ADB) on Thursday lowered its prior forecast of India's FY23 growth to 7.2% from 7.5%, citing higher-than-expected inflation since April and subsequent central bank monetary tightening as reasons.
The multilateral development bank with headquarters in Manila has increased its inflation prediction for India from 5.8 to 6.7% for FY23.
Despite the fact that consumer confidence is still rising, higher-than-expected inflation will reduce their spending power. "A reduction in excise taxes, the provision of fertiliser and gas subsidies, and the extension of a free-food distribution programme may somewhat counterbalance the impact of this," the Asian Development Bank (ADB) stated in its latest Asian Development Outlook Supplement.
In the March quarter of FY22, India's GDP growth slowed to 4.1% due to a "disappointing" increase in private consumption and a decline in manufacturing.
According to ADB, while the Reserve Bank of India (RBI) keeps raising policy rates to control inflation, private investment will wane as a result of the increased cost of borrowing for businesses. Despite the rupee's depreciation, it continued, "Net exports would decline due to weak global demand and a rising real effective exchange rate, which is weakening export competitiveness."
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