ADB Retains India's Growth Forecast at 7%, Highlights Resilience Amid Global Challenges

The Asian Development Bank (ADB) has maintained India's growth forecast for the current fiscal year at 7%. The growth is expected to be driven by improved agricultural output and increased government spending. ADB's report also highlights robust performance in the services and industry sectors, despite global geopolitical challenges.

The Asian Development Bank (ADB) on Wednesday retained India's growth forecast for the current fiscal at 7 per cent, stating that better farm output and higher government spending would boost economic activity.

In its Asian Development Outlook (ADO) update of September, the ADB said India's exports in the current fiscal would surpass earlier projections, driven by larger services exports; however, merchandise export growth would be relatively muted in the next fiscal.

ADB projected GDP growth at 7 per cent in fiscal year 2024 (FY2024, ending 31 March 2025) and 7.2 per cent in FY2025, confirming India's strong growth prospects.

While India's economy grew by 8.2 per cent in the last fiscal (2023-24), the Reserve Bank of India projects a growth of 7.2 per cent for the current fiscal. The ADB noted that GDP growth slowed to 6.7 per cent in the first quarter (April-June) of FY2024 but is expected to accelerate in the coming quarters.

Mio Oka, ADB Country Director for India, emphasized that India's economy has shown remarkable resilience amidst global geopolitical challenges and is positioned for steady growth, with improvements in agriculture enhancing the rural economy.

The report indicates that above-average monsoon rains would lead to strong agricultural growth in FY2024, further boosting rural spending and aiding the industry and services sectors. Private consumption is expected to improve, fueled by both robust agriculture and urban spending.

The outlook for private investment is positive, though public capital expenditure growth will moderate in FY2025. Fiscal consolidation efforts are anticipated to lower the fiscal deficit and central government debt.

The ADB highlighted a recent policy announcement offering employment-linked incentives, which could enhance labor demand starting in FY2025.

Despite risks including geopolitical shocks and adverse weather, the forecast remains positive, bolstered by strong service exports and remittances.