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New Delhi: The Asian Development Bank (ADB) anticipates continued robust growth for India’s economy, predicting a 7 per cent rise in gross domestic product (GDP) for the fiscal year 2024 (ending March 31, 2025) and 7.2 per cent for FY2025.
These forecasts were detailed in the bank’s Asian Development Outlook report for September 2024.
Mio Oka, ADB’s Country Director for India, remarked, “India’s economy has demonstrated significant resilience amid global geopolitical challenges and is on track for consistent growth. Enhancements in agriculture are expected to boost rural expenditure, which will be augmented by the strong performance of the industrial and service sectors.”
The report suggests that an above-average monsoon throughout much of India is likely to drive robust agricultural expansion, benefiting the rural economy in FY2024. The ADB holds an optimistic view for the industrial and service sectors, as well as for private investments and urban consumption for both FY2024 and FY2025. Additionally, a novel government scheme offering employment-related incentives to workers and businesses is projected to increase labour demand and encourage job creation beginning in FY2025, according to the bank.
Owing to the government’s fiscal consolidation efforts, the central government debt is expected to decrease from 58.2 per cent of GDP in FY2023 to 56.8 per cent in FY2024. The report also stated that the general government deficit, including the state governments, is likely to drop below 8 per cent of GDP in FY2024.
Consumer inflation is projected to climb to 4.7 per cent in FY2024, propelled by elevated food prices, despite a predicted rise in agricultural production. This has restrained the central bank’s capacity to adopt a more accommodating monetary policy. Nonetheless, should the enhancements in agricultural supply result in reduced food prices, the central bank might contemplate reducing policy rates in FY2024, potentially encouraging credit growth.
“India’s current account deficit is projected to be 1 per cent of GDP in FY2024 and 1.2 per cent in FY2025, a decrease from the earlier forecast of 1.7 per cent for both years, attributed to improved exports, reduced imports, and robust remittance inflows,” stated the report. It highlighted potential short-term growth risks such as geopolitical tensions that might disrupt global supply chains and influence commodity prices, along with weather-related issues affecting agricultural output. The forecast is based on the premise that the central government will achieve its capital expenditure targets for FY2024, according to the report.
The report also noted that these risks could be offset by an increase in foreign direct investment, which is expected to stimulate growth and investment, especially in the manufacturing sector. “Moreover, an enhancement in the availability of agricultural products could lead to a reduction in food prices, possibly bringing consumer inflation below the projected levels,” the report added.
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