ADB pegs 2022-23 GDP growth at 7.5%

Average inflation to rise to 5.8% this year; State finances pose a key challenge

The Asian Development Bank (ADB) forecasts India’s GDP growth to moderate to 7.5% in 2022-23 from an estimated 8.9% in 2021-22, but will pick up to reach 8% in 2023-2024.

The ADB has factored in the Russia-Ukraine conflict’s implications for India, which will be largely indirect through higher oil prices, and has assumed that the severity of the COVID-19 pandemic will subside with a rise in vaccination rates.

Although oil prices will exert upward pressure on the inflation front, the impact on inflation would be moderated by fuel subsidies and oil refineries stocking up on cheap crude from the Russian Federation, the ADB noted, predicting an average inflation rate of 5.8% in 2022-23, and 5% in 2023-24. There would still be an upward pressure on consumer prices with oil prices expected to average over $100 a barrel through 2022.

In its Asian Development Outlook report released on Wednesday the bank stated that food prices were expected to rise in tandem with increasing commodity prices

Higher public capital spending was expected to improve the efficiency of India’s logistics infrastructure, crowd-in private investment, generate jobs in construction and sustain growth, the bank said, emphasising that economic activity this year would hinge on catalytic effects of public investment.

The ADB expects capacity utilisation rates in Indian industry to improve over the first half of 2022-23, creating room for fresh investments, as private consumption could pick up amid the ebbing pandemic severity and mobility restrictions.

“Inflation will accelerate and the current account deficit widen due to the surge in global oil prices,” it said, identifying the mobilisation of domestic resources as a key challenge at ‘all levels of government’ as India’s tax to GDP ratio of about 17% has been largely unchanged since the early 1990s.