New Delhi, July 11: Asian Development Bank (ADB) has lowered its projected economic growth of India from 6.9 per cent to 6.6 percent for the current financial year, citing persistent energy price pressures and rising transportation costs.
ADB has warned about the external risks which are likely to weigh on the country’s growth momentum over the coming year.
In its latest report, the ADB has said that higher crude oil prices are increasing logistics and input costs across industries while also reducing consumers’ purchasing power.
As India imports nearly 85 per cent of its crude oil requirements, any sustained increase in international oil prices has a direct impact on inflation and economic activity, it said.
Despite the downgrade, the ADB maintained that India’s growth prospects remain relatively strong compared to many other emerging economies.
Continued public investment in infrastructure, steady expansion in the services sector and robust domestic demand are expected to provide support to the economy.
According to the ADB, rising fuel prices are expected to push up transportation costs and raise the prices of goods and services, leading to broader inflationary pressures.
The institution has also revised its inflation projection upward, highlighting that higher living costs could reduce household spending and affect private consumption, one of the key drivers of India’s economic growth.
The report added that businesses dependent on fuel-intensive operations, including manufacturing and logistics, may witness higher operating expenses if global crude prices remain elevated. This could delay fresh investments and affect profitability across several sectors.
Global geopolitical tensions and supply disruptions have kept energy markets volatile in recent months.
The ADB observed that uncertainty surrounding crude oil supplies continues to pose downside risks for oil-importing economies such as India.
Even so, the lender expects government capital expenditure and ongoing infrastructure development to continue supporting economic activity. Investments in roads, railways, digital infrastructure and manufacturing are expected to partially offset the impact of weaker global conditions.
The report also pointed out that India’s services sector continues to remain resilient, supported by healthy demand for financial services, information technology and tourism-related activities.
Strong tax collections and stable banking sector fundamentals are also expected to help sustain growth.
Economists believe that India’s economic performance over the coming year will largely depend on the trajectory of global crude oil prices. A moderation in energy prices would ease inflationary pressures, improve consumer confidence and provide greater room for businesses to expand investment.
However, if oil prices remain elevated for an extended period, policymakers may have to carefully balance inflation control with measures aimed at supporting economic growth. The Reserve Bank of India is also expected to closely monitor inflation trends while deciding the future course of monetary policy.
Although the latest revision reflects growing global uncertainties, the ADB said India’s long-term economic fundamentals remain intact. Strong domestic demand, ongoing structural reforms and sustained infrastructure spending are expected to keep the country among the world’s fastest-growing large economies despite near-term external challenges. (BVI)
