Acknowledging the resilience character, the Asian Development Bank (ADB) on Wednesday retained India’s economic growth rate at 7 per cent for current fiscal year, i.e., 2024-25 (FY25).
Economic growth is measured on the basis of Gross Domestic Products (GDP)
“The Asian Development Bank (ADB) forecasts that India’s economic growth will remain robust, with gross domestic product (GDP) expected to increase by 7 per cent in fiscal year 2024 (ending 31 March 2025) and 7.2 per cent in fiscal year 2025,” the multilateral agency said in its Asian Development Outlook (ADO) September 2024, which was released on Wednesday. The forecasts are consistent with the ADO report from April.
The agency has listed geopolitical shocks as near-term growth risks which could disrupt global supply chains and commodity prices, as well as weather-related risks to agricultural output.
These risks may be offset by higher foreign direct investment, which could support growth and investment, particularly in manufacturing. Additionally, improvements in the supply of agricultural products may reduce food prices, potentially lowering consumer inflation below the forecast.
This projection is bit higher than S&P Global’s and OECD’s forecast of 6.8 per cent but at par with that of World Bank, IMF and ADB. Moody’s, Fitch and RBI have projected a higher growth rate of 7.2 per cent, although the government’s projection is slightly lower.
In its monthly economic review released last month, the Finance Ministry said, “As of now, the projection of real GDP growth of 6.5-7.0 per cent for FY25, made in the Economic Survey for 2023-24, seems appropriate.”
Commenting on India’s growth forecast, ADB Country Director for India Mio Oka said that it has shown remarkable resilience in the face of global geopolitical challenges and is poised for steady growth “Agricultural improvements will enhance rural spending, which will complement the effects of robust performance of the industry and services sectors,” she said.
The report highlighted that an above-average monsoon in most parts of the country will lead to strong agricultural growth, enhancing the rural economy in current fiscal.
It maintains a positive outlook for the industry and services sectors, private investment, and urban consumption for this and next fiscals. Additionally, a new government policy offering employment-linked incentives to workers and firms could increase labour demand and support job creation starting next fiscal.
Taking note of the government’s fiscal consolidation efforts, the agency said that central government debt is projected to decrease to 56.8 per cent this fiscal from 58.2 per cent of GDP in last fiscal. The general government deficit, which includes state governments, is expected to fall below 8 per cent f GDP in current fiscal, it said.
Consumer inflation is anticipated to rise to 4.7 per cent this fiscal due to elevated food prices, despite higher agriculture output expectations.
This has prevented India’s central bank from adopting a more accommodative monetary policy. “If improved agricultural supply leads to moderating food price increases, the central bank may begin lowering policy rates in current fiscal enhancing prospects for credit expansion,” the agency said.
India’s current account deficit is forecast to be 1 per cent this fiscal and 1.2 per cent next fiscal down from the previous forecast of 1.7 per cent for both years, due to better exports, lower imports, and strong remittance inflows.