ADB Current Affairs

India’s economy to grow 7.3% in 2018-19 and 7.6% in 2019-20: ADB Outlook

The Asian Development Outlook 2018 released by Asian Development Bank (ADB) has projected India’s economic growth to 7.3% in 2018-19 fiscal and further to 7.6% in 2019-20 fiscal. The ADB’s growth projection is in line with that of rating agency Fitch, but is lower than Reserve Bank of India’s (RBI) forecast of 7.4%.

Asian Development Outlook 2018

India’s growth Projection: Indian growth is expected to pick up to 7.3% in fiscal year (FY) 2018 and 7.6% in FY2019, following the estimated 6.6% in FY2017. India will remain the world’s fastest growing major economy.

India’s growth will pick up with increased productivity post Goods and Services Tax (GST) and investment revival due to banking reform and corporate deleveraging take hold to reverse downtrend in investment.

The impact of demonetization of high-value banknotes has dissipated and full implementation of GST will bolster growth in India in 2019.

Indian economy grew 6.6% in last fiscal (2017-18) as it battled lingering effects of demonetisation in 2016, businesses adjusting GST in 2017 and subdued agriculture.

Growth Projections in South Asia: It will remain among world’s fastest, driven by recovery in India, region’s largest economy. Asian consumers and commodity price rises will fuel higher inflation in the region.

China’s growth projection: It will slow down to 6.6% and 6.4% in 2018 and 2019 respectively as its domestic economic policy leans further toward financial stability and more sustainable growth trajectory.

Regional Inflation Projections: It is projected to average 4.6% in FY 2018 (2018-19), rising to 5% in FY 2019 with further firming of global commodity prices and strengthening of domestic demand. Regional consumer price inflation (CPI) is projected to accelerate to 2.9% in 2018 and 2019, from 2.3% registered in 2017. Inflation projections for next two years, however, are well below 10-year regional average of 3.7%.

Prospects for Policy stimulus: It remains limited and there is risk of tight interest rate regime. The deferment of fiscal consolidation, upside risks of inflation and expected hikes in US interest rates in 2018 will squeeze maneuvering room for policy rate cuts to stimulate growth.

Asian Development Bank (ADB)

ADB is a regional development bank which aims to promote social and economic development in Asia. It was established in December 1966. It is headquartered in Manila, Philippines. Now it has 67 members, of which 48 are from within Asia and the Pacific and 19 outside.

The ADB has been modelled closely on the World Bank. It has similar weighted voting system where votes are distributed in proportion with members’ capital subscriptions. As of 2014, Japan was largest shareholder (capital subscription) of ADB having 15.7% shares followed by US (15.6%), China (6.5%), India (6.4%), and Australia (5.8%).

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ISA-ADB, NDB, GCF, AfDB and AIIB sign joint declarations of financial Partnership

The International Solar Alliance (ISA) and African Development Bank (AfDb), Asian Infrastructure Investment Bank (AIIB), Asian Development Bank (ADB), Green climate fund (GCF), and New Development Bank (NDB) signed Joint financial partnership Declarations. The International Energy Agency (IEA) also signed Joint partnership Declaration with ISA. The objective of these agreements is to deepen their cooperation in support of renewable energy. ISA had earlier signed three partnerships with World Bank, European Investment Bank (EIB) and European Bank for Reconstruction and Development (EBRD).

International Solar Alliance (ISA)

The ISA was one of key takeaways at Paris Climate summit, 2015 (2015 UN Climate Change Conference, COP 21 or CMP 11). It is aimed at tapping solar energy in the countries that lie partially or fully between Tropics of Cancer and Capricorn. ISA is first treaty-based intergovernmental organisation (entered into force in December 2017) to be headquartered at Gurugram, India.

Its major objectives include global deployment of over 1,000GW of solar generation capacity and mobilisation of investment of over US $1000 billion into solar energy by 2030. It also aims to bring together countries with rich solar potential to aggregate global demand, thereby reducing prices through bulk purchase, facilitating deployment of existing solar technologies at scale and promoting collaborative solar R&D and capacity building.

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