InvestorQ : Why has ADB downgraded India’s GDP growth for FY22?
Chandralekha Desai made post

Why has ADB downgraded India’s GDP growth for FY22?

NISHA Nayak answered.
1 year ago

The Asian Development Bank or ADB downgraded India's economic growth forecast for FY22 to 10% a full 100 bps lower than its original forecast of 11%. This downgrade in growth estimates was largely on account of the possible lag effect of COVID 2.0. At the same time, the ADB has also raised its inflation forecast for the entire Asian region by 10 bps to 2.40% due to a sharp spike in crude oil prices as well as the prices of other commodities in Q1.

The inflation forecast for South Asia, including India, has been raised by 30 bps to 5.8%, which is approximately what the CPI has been reported in the Indian context. This is likely to impact the real GDP growth substantially, even as COVID 2.0 has put a spanner in the factory works. On the other hand, ADB has upgraded the GDP growth forecast for FY23 by 50 bps from 7% to 7.5%, by which time it expects the dividends of total vaccination to kick in.