ADB Maintains India's GDP Growth Forecast Amid Positive Projections

The Asian Development Bank reaffirms India's GDP growth forecast at 7%, citing an agricultural rebound due to projected above-normal monsoons. This follows the IMF and RBI's upward revisions. Despite potential risks from weather and geopolitics, robust investment, banking credit, and strong service sector performance underpin growth projections.

The Asian Development Bank (ADB) has upheld its GDP growth forecast for India at 7% for the current financial year, attributing this optimism to an anticipated rebound in agriculture, driven by above-normal monsoon projections.

This forecast follows a recent revision by the International Monetary Fund (IMF), which upgraded its projection for India's GDP growth to 7%, up from the previous estimate of 6.8% in April, and an earlier upward revision by the Reserve Bank of India (RBI) to 7.2% from 7%.

According to the July edition of the Asian Development Outlook (ADO), the Indian economy is on course to grow by 7% in FY2024, concluding in March 2025, and 7.2% in FY2025. The economy previously recorded an 8.2% growth rate for the fiscal year ending March 2024, compared to 7% in the prior year, bolstered by robust expansion in the services sector and strong performance in manufacturing and construction industries.

The report indicates that investment demand remains vigorous, driven by public investments and a rise in bank credit, fueling housing demand and enhancing private investment. However, it notes that export growth will continue to be service-led, with merchandise exports showing relatively weaker growth. Additionally, a stronger fiscal position by the central government may further boost growth, despite potential challenges posed by adverse weather conditions and geopolitical tensions. The ADO forecasts inflation to be steady at 4.6% for the current financial year, with a slight decline to 4.5% next fiscal.

On a broader scale, the ADO has revised its growth forecast for developing Asia to 5% in 2024, maintaining it at 4.9% for 2025. This adjustment reflects upward revisions in the Caucasus, Central Asia, and East Asia. Regional inflation forecasts have been reduced to 2.9% for 2024 due to downward revisions in China and the Caucasus and Central Asia, offsetting minor increases in South Asia.

(With inputs from agencies.)