The Asian Development Bank (ADB) on Thursday lowered the economic growth forecast for India for the current fiscal year (2022-23) to 7.2 per cent from 7.5 per cent projected in April.

“India has been hit by the Omicron Covid-19 variant and the economic impact of the war in Ukraine. Consequently, GDP growth for FY2022 is revised down to 8.7 per cent from 8.9 per cent and to 7.2 per cent from 7.5 per cent for FY2023 (fiscal year ending March 2023). Although consumer confidence continues to improve, higher-than-expected inflation will erode consumer purchasing power,” ADB said in its supplement to the Asian Development Outlook (ADO) for 2022

Some of the impacts of this may be offset by a cut in excise duties, the provision of fertiliser and gas subsidies, and the extension of a free food distribution programme, it said. Private investment will soften due to the higher cost of borrowing for firms as the RBI continues to raise policy rates to contain inflation.

For the South Asian region, it has lowered the growth forecast for 2022 to 6.5 per cent from 7 per cent and from 7.4 per cent to 7.1 per cent for 2023, due mainly to the economic crisis in Sri Lanka and high inflation and associated monetary tightening in India. “The economic impact of the pandemic has declined across most of Asia, but we are far from a full and sustainable recovery,” said ADB Chief Economist Albert Park.

On top of the slowdown in the PRC (People’s Republic of China), the fallout of the war in Ukraine has added to inflationary pressure that’s causing central banks around the world to raise interest rates, acting as a brake on growth. It’s crucial to address all these global uncertainties, which continue to pose risks to the region’s recovery, Park said.