The Asian Development Bank (ADB), has slashed India’s GDP growth forecast to 7.2 per cent for FY23. Earlier this was estimated at 7.5 per cent. Meanwhile, the Manila-based multilateral development bank has revised down FY24 growth forecast to 7.8 per cent, from 8 per cent estimated earlier. It, however, raised the inflation forecast for India to 6.7% for FY23 from the 5.8 % estimated earlier.
Why does this happen?
- ADB added that private investment would soften due to the higher cost of borrowing for firms as the RBI continues to raise policy rates to contain inflation. The RBI’s monetary policy committee hiked the repo rate by 90 basis points in two consecutive months, May (an off-cycle policy review) and June, raising the repo rate to 4.9%.
- ADB, in the supplementary outlook, also said that net exports would shrink due to subdued global demand and a rising real effective exchange rate eroding export competitiveness despite a depreciating rupee.
- The rupee touched an all-time low of 80.06 against the dollar. The domestic currency has depreciated about 7.5% against the greenback in 2022 so far.
Important takeaways for all competitive exams:
- Asian Development Bank Headquarters: Mandaluyong, Philippines;
- Asian Development Bank President: Masatsugu Asakawa;
- Asian Development Bank Founded: 19 December 1966.