Steady reform progress fuelling India's growth pick-up: ADB

"Growth is expected to recover to 6.6% in 2018 because the government plans to further ramp up public infrastructure investment as well as second-round effects of fiscal spending in 2017", ADB Principal Country Specialist Joven Z. Balbosa said in a press conference at the ADB headquarters in Mandaluyong City on Thursday. Asia's developing economies will see steady growth this year and the next, though the evolving policies of Presiden.

The more immediate risk is that the tough USA talk encourages other advanced economies to consider similar policies, which would end up squelching worldwide trade, it said. Exports are forecast to grow by 6 per cent in the coming year.

"The central bank will have to factor into this delicate balance the future course of USA interest rates", it added; hence, "a$3 measured hike in the central bank policy rate is likely".

In its Asian Development Outlook 2017, ADB identified possible trade and investment protectionism by industrial economies would impact foreign direct investments, business process outsourcing revenues, and remittances in the country.

If those rate increases come more rapidly because of stronger than expected US economic growth, the "sharper than expected monetary tightening could have further consequences for developing Asia", the ADB said in its Asian Development Outlook.

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But the export growth is expected to rise further to 7 percent in the 2017-'18 fiscal on steady external demands and improvement in the Bangladesh market share, it projected.

Sustained growth, however, also requires continued efforts to improve infrastructure and deepen structural reform. Exports continued to decline in the third consecutive years due to waning global demand and weak worldwide commodity prices as well as domestic structural issues, such power outages and lack of investment in modernisation and currency appreciation in real effective terms. "A continued commitment to reform ~ especially in the banking sector ~ will help India maintain its status as the world's fastest growing major economy", Sawada observed.

2017 report, ADB notes that the deceleration to 7.1 per cent registered previous year was due in part to slower investment growth.

It added that Indian economy would stay ahead of neighbour China.

ADB forecast inflation to rise to 3.3% in 2017 and then fall to 2.7% with the fading of the base effect from lower prices a year ago.

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The possibility of sharper-than-expected interest rate hikes by the U.S. Federal Reserve cloud the outlook for Asia.

The recovery in global oil prices sets the stage for a modest recovery in Central Asia, with growth of 3.1% seen for 2017 and 3.5% for 2018, after slowing to 2.1% in 2016.

"The central bank will have to factor into this delicate balance the future course of USA interest rates. But at the same time, countries with more flexible exchange rate, if they have been operating around the economy potential, it will also have bear higher inflation pressures", Ramayandi said.

Further improvements in the US economy will trigger capital outflows from Asia, the ADB said.

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