Asian Development Bank (ADB) Forecasts India’s GDP Growth for FY 25 to 7 Pct: ADB has revised its growth forecast for India’s gross domestic product (GDP) for the financial year 2024, projecting it to increase from 6.7 percent to 7 percent. Additionally, the ADB forecasts a growth rate of 7.2 percent for the financial year 2025.
This upward adjustment in economic growth projections is attributed to robust public and private investment, as well as a strong performance in the services sector, according to the ADB’s flagship economic publication, the Asian Development Outlook (ADO) April 2024.
The growth drivers for the financial year 2024 include increased capital expenditure on infrastructure development by both central and state governments, a rise in private corporate investment, a robust performance in the service sector, and improved consumer confidence.
Looking ahead to the financial year 2025, the momentum is expected to accelerate further, driven by enhanced goods exports, increased manufacturing productivity, and a rise in agricultural output.
India’s GDP exhibited substantial growth of 8.4 per cent during the October-December quarter of the current financial year 2023-24, maintaining its position as the fastest-growing major economy. The growth rates for the preceding two quarters stood at 7.8 percent and 7.6 per cent, respectively.
In the previous fiscal years, India’s economy expanded by 7.2 percent in 2022-23 and 8.7 percent in 2021-22.
Mio Oka, the ADB Country Director for India, highlighted India’s resilience amid global challenges, emphasizing the nation’s strong domestic demand and supportive policies.
The ADB emphasized the significance of government initiatives aimed at boosting infrastructure development, fostering an enabling business environment, and promoting fiscal consolidation to enhance manufacturing competitiveness, augment exports, and stimulate future growth.
A notable increase of 17 percent in central government capital expenditure for the financial year 2024, coupled with transfers to state governments, is expected to bolster infrastructure investment, as per the ADB.
The government’s initiatives to support urban housing for middle-income households are anticipated to further stimulate housing growth, while stable interest rates are likely to spur private corporate investment.
With inflation moderating to 4.6 per cent in financial year 2024 and further easing to 4.5 per cent in financial year 2025, the ADB suggests that monetary policy may become less restrictive, facilitating rapid credit uptake from banks.
The demand for financial, real estate, and professional services is projected to increase, while the manufacturing sector is poised to benefit from subdued input cost pressures, boosting industry sentiment. Expectations of a normal monsoon are anticipated to bolster agricultural sector growth.
The government’s focus on fiscal consolidation, with targeted deficit levels for FY2024 and FY2025, is expected to reduce gross marketing borrowing and create additional space for private sector credit.
Despite a moderate widening of India’s current account deficit to 1.7 percent of GDP, driven by rising imports to meet domestic demand, the ADB predicts a pickup in foreign direct investment and goods exports in FY 2025 as global economic conditions improve.
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