The Asian Development Bank (ADB) lowered India’s GDP growth projection for the year 2022-23 to 7 per cent from the earlier 7.2 per cent based on higher-than-expected inflation and monetary tightening.

Amid rising challenges which include increased monetary tightening by central banks, the fallout from the Russian invasion of Ukraine and recurring Covid-19 lockdowns in China, ADB had lowered its forecasts for economic growth in developing Asia and the Pacific. ADB’s flagship Asian Development Outlook (ADO) report, released on Wednesday, said India’s economy grew 13.5 per cent year-on-year in the first quarter of 2022-23, reflecting strong growth in services.

“However, GDP growth is revised down from ADO 2022’s forecasts to 7% for FY2022 (ending in March 2023) and 7.2% for FY2023 (ending in March 2024) as price pressures are expected to adversely impact domestic consumption, and sluggish global demand and elevated oil prices will likely be a drag on net exports,” it said.

In the Asian Development Outlook (ADO) 2022 report, ADB Chief Economist Albert Park had said, “Developing Asia continues to recover, but risks loom large.”

“A significant downturn in the world economy would severely undermine demand for the region’s exports. Stronger-than-expected monetary tightening in advanced economies could lead to financial instability,” the ADB chief economist had said in the earlier report.

ADO also mentioned that it expected the Chinese economy to grow by 3.3% in 2022 from the earlier forecast of 5% in April. The recurring lockdowns resulting from Covid-19 infections, problems in the real estate sector and weaker external trade demand still continue to weigh on China’s economic activity, the report said.

This will be the first year in more than three decades that the rest of developing Asia will grow faster than the People’s Republic of India.

Earlier, during the Global Fintech Fest held in Mumbai on Tuesday, Chief Economic Advisor V Anantha Nageswaran had said that the Indian economy will grow at over 7%, which is lower than the government’s earlier estimates of above 8% growth.

He also mentioned that the momentum of the economy and the animal spirit are “unmistakable”.