India to continue facing tough times ahead: ADB

While Asian economies could experience a steady growth at 6.1 percent in 2014, the Asian Development Bank has said India will continue to struggle at 5.5 percent due to industrial slowdown

GN Bureau | April 18, 2014




Amid growing anxiety over possible improvement in the global economy, the Asian economy is likely to witness a steady growth rate this fiscal, the Asian Development Bank (ADB) has forecasted.

According to a recent report by the bank the Asian Development Outlook (ADO) 2014,  the region will experience a slight increase in growth from 6.1 percent in 2013 to 6.2 percent this fiscal followed by 6.4 percent in the next fiscal.

"Moderating growth in the People’s Republic of China (PRC) as its economy adjusts to more balanced growth will offset to some extent the stronger demand expected from the industrial countries as their economies recover," the ADB report said.

The good news will soothe frayed nerves of investors waiting for the lull in demand from developed economies to disappear.

On India, the bank is positive about economic slowdown having bottomed out last year given the strong policy measures in place to address currency volatility and high current account deficit. However, it has warned that weaknesses - high levels of inflation, fiscal imbalances, low investment activity and infrastructural inefficiencies- continue to persist.

The bank has trimmed India’s growth forecast from its December estimate of 5.7 percent to 5.5 percent for this fiscal due to the industrial slowdown. "Without a systemic resolution to these, growth is forecast to pick up modestly," the report said.

Calling the government’s GDP growth estimate at 4.9 percent for 2013-2014 a "tad bit optimistic", the report said that in order to achieve that figure, the economy would have to grow by 5.5 percent in the last quarter of the fiscal. "The marginal pickup in headline GDP growth masks underlying weakness in the economy as it was due to stronger agriculture. Excluding agriculture, GDP growth slipped from 5 percent in 2012 to 4.9 percent in 2013," the report revealed.

The report further said that growth in the services sector had also taken a hit as it dropped below 7 percent. Most of the services sector including trade, hotels, and transport and communication services had experienced a slump, while the financial services industry remained surprisingly healthy at 11.2 percent. However, the bank has clarified that this was due to large inflows coming from Indian non-residents under a temporary foreign exchange swap window. "This appears to be largely a one-off event," the report said.

In addition, domestic consumption has also declined to 4.1 percent owing to a weak and volatile currency, persistent food inflation, continuously rising fuel prices and limited employment opportunities.

On the Indian economy’s prospects for improvement, the report has suggested that recovery would have to be led by improved investment and consumption. It, however, clarifies that the prospects “do not appear promising” in the present scenario. “Elevated inflation, a tight monetary stance, and a weak currency will continue to constrain spending. Further, fiscal austerity is likely to be an additional drag on growth,” the report added.

Read the full report here

 

Comments

 

Other News

Why #NotInMyName can’t be in my name

 It was big. It was energetic. It was emotional and soul awakening. It was the need of the hour. Its message was loud and clear. But #NotInMyName cannot be in my name. The #NotInMyName protest is a demonstration that was scheduled in Delhi and in some 21 cities across the country on June 28

Why Gorkhaland is an idea whose time has come

Darjeeling and the neighbouring areas are burning once again after the fire of the demand for Gorkhaland state was ignited by the West Bengal government’s provocative action in trying to impose Bengali language on the Gorkhali speaking majority in the hill districts in the north of the state. Three p

India stares down the dragon

India is increasingly turning to defence diplomacy to gain strategic depth in its neighbourhood and beyond, a move that is expected to checkmate China’s muscular domination. Defence as a tool of diplomacy is helping India to win over friendly countries who are currently witnessing a lot of

Recalling a time when BJP opposed GST

The Bharatiya Janata Party is today going to town over the Goods and Services Tax (GST). But, there was a time in the recent past when the party opposed it tooth and nail, with the Gujarat government, then led by Narendra Modi, describing it as “retrograde in nature and completely against the tenet

No water in a reservoir that supplies Chennai

There is not even a drop of water in Cholavaram reservoir, says an officer from Chennai metropolitan water supply and sewerage board. The Cholavaram reservoir, one of the main water sources to Chennai, currently has zero million cubic feet (mcft) of water, according to data provided by Chennai me

Should Air India be sold off?

Should Air India be sold off?





Video

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter