The Asian Development Bank cut its 2012 and 2013 growth estimates for several developing countries in Asia Wednesday, citing weakness in global demand.

The ADB cut its growth forecast for China to 7.7 percent from the previous 8.5 percent in 2012 and to 8.1 percent from 8.7 percent for 2013.  The ADB expects that India would grow 5.6 percent in 2012 and 6.7 percent in 2013, compared to the previously estimated 7.0 and 7.5 percent growth in 2012 and 2013 respectively.

In the “Asian Development Outlook 2012 Update” released Wednesday, the bank said that the developing Asia should be ready to brace for a prolonged period of moderate expansion amidst an ongoing slump in global demand after years of rapid growth.

It said that the economies in the region should reduce their reliance on exports and exploit the boom in service sector to sustain the growth levels.

“Developing Asia must adapt to a moderate growth environment, and countries will need to do more to reduce their reliance on exports, rebalance their sources of growth, and increase their productivity and efficiency,” said Changyong Rhee, ADB’s chief economist.  

According to the ADB, the region’s gross domestic product (GDP) growth is dropping to 6.1 percent in 2012 and 6.7 percent in 2013, down significantly from 7.2 percent in 2011. The GDP growth in the two largest economies in the region -- China and India -- has also decelerated as the slowdown in the U.S. and the euro zone crisis has affected the exports from these countries negatively.

The slowdown in China has a rippling effect in South Asia as the interregional exports are hit while India, on the other hand, is affected by the weak investment demand and the delayed monsoon, which curtailed agricultural growth.

“India can start reversing this trend by improving its investment climate and expediting reforms,” said Changyong Rhee. “Tight monetary policy to counter persistently high inflation and a high deficit leave little room for policy to stimulate growth. However, restoring investor confidence can help jumpstart critical infrastructure projects that could get the economy moving.”

The ADB says that the booming service industry can boost the economic growth and create jobs in developing Asia, but the political restrictions and red tapes block economies from exploiting its full potential.

“A slew of regulations restrict competition and hamper development of the services sector, affecting everything from the corner shop to mobile telephones,” said Changyong Rhee. “These barriers need to be dismantled so that everyone, particularly the region’s poor; can seize the opportunities of growth,” he added.

The bank kept the growth forecast for the Pacific region unchanged at 6 percent for 2012.