ADB Lowers Its Prediction For India's Growth To 7.2 Percent In View Of Rising Food And Fuel Prices

The Asian Development Bank (ADB) reduced its growth prediction for India for Financial Year 2023 from 7.5 percent in April to 7.2 percent on Thursday.

The Bank blamed India's rising food and gasoline prices for the altered prediction. This is also related to the continuing geopolitical conflicts and supply-chain disruptions that are making the economic situation worse.

A growing impact of the conflict in Ukraine, according to the research, "may lead to a further increase in global energy and commodity prices, with likely knock-on implications for growth and inflation in emerging Asia."

Additionally, the resurfacing Covid worries in India may have an impact on demand. According to the analysis, the rising inflationary pressures could eventually have an impact on consumer purchasing power. 

The strengthening of the US currency against the INR only makes these concerns worse. It is expected to cause India to experience additional uncertainty. According to the ADB research, a tightening of financial conditions may cause growth to slow.
In India, the June inflation rate was 7.01 percent, exceeding the Reserve Banks' tolerance threshold of 2 to 6 percent for the sixth consecutive month. This might encourage the RBI to raise rates again to control inflation.

Most Asian nations are experiencing rapid increases in inflation. A number of nations, including Mongolia, Pakistan, Sri Lanka, Laos, and Myanmar, have experienced double-digit inflation rates.
 

ADB reduced its growth projection for the Asia area from 5.2 percent to 4.6 percent for FY23 as a result of persistent geopolitical unrest and supply-side problems. Due to rising food and gasoline prices, it also raised its inflation forecast from 3.7 percent to 4.2 percent.

The analysis warned that a significant slowdown in global economy may harm exports, manufacturing, and employment prospects as well as trigger turmoil in the financial markets.