South Asia’s largest economy, India, is expected to see growth moderate to 5.8% in 2013 against the earlier projection of 6.0%. While this is higher than the 5.0% posted in 2012, growth remains constrained by supply-side bottlenecks, as reflected in the continued slowdown in fixed capital formation, weakness in the industrial sector, and sluggish progress in pushing through badly needed structural reforms. However, growth in India is expected to accelerate in 2014 as slower inflation provides some scope for monetary easing that could boost investment and consumption. Growth will be further boosted by pre-election spending, and the pickup in growth of the United States economy will support Indian tech companies and related service sectors.

Source: Asian Development Outlook (ADO) 2013; ADB estimates.

Source: Asian Development Outlook (ADO) 2013; ADB estimates.

With expected declines in commodity prices and decelerating growth, inflationary pressures within developing Asia will be generally less acute than anticipated in the Asian Development Outlook 2013. India has benefited from a favorable monsoon that pushed down domestic food prices, such that overall price increases should average 6.5% this year.

Source: ADB. 2013. Asian Development Outlook 2013 Supplement. Manila.

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Economic performance in 2012

Economic growth in fiscal year 2012 (ended 31 March 2013) decelerated to 5%, its lowest in a decade, from 6.2% in FY2011. While tepid industrial growth and a downdraft in investment continued from FY2011, the downturn was exacerbated by a slump in services activity, weakening consumption, and contracting exports.

Source: ADB. 2013. Asian Development Outlook 2013. Manila.

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