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The Asian Development Bank (ADB) has revised India's Gross Domestic Product (GDP) growth forecast for the fiscal year 2024-25 to 7%, up from its earlier projection of 6.7%. This upward revision comes on the back of robust investment and a recovery in consumer spending despite global economic slowdowns.
The ADB's latest forecast indicates a positive outlook for India's economic trajectory, driven primarily by both public and private sector investment demand, coupled with a gradual improvement in consumer demand. The growth estimate for FY25, while commendable, reflects a moderated pace compared to the previous fiscal years, notably lower than the 7.6% projected for FY23.
According to the ADB's April edition of the Asian Development Outlook, the Indian economy demonstrated robust growth in fiscal year 2023, propelled by strong momentum in manufacturing and services sectors. This momentum is expected to persist over the forecast horizon, driven by investment and consumption demand. Inflation is anticipated to continue its downward trend, aligning with global trends.
Despite the moderation in growth forecast for FY24 and FY25, the ADB remains optimistic about India's economic prospects. For the fiscal year 2025-26, the ADB projects India's growth at 7.2%.
The ADB anticipates relatively muted export growth in the current fiscal year, attributed to the slowdown in major advanced economies. However, exports are expected to improve in FY25. The ADB underscores the importance of greater integration into global value chains to boost exports in the medium term.
In terms of monetary and fiscal policies, the ADB expects monetary policy to remain supportive of growth as inflation abates. Fiscal policy aims for consolidation while retaining support for capital investment. Overall, growth is forecasted to slow to 7% in FY24 before improving to 7.2% in FY25.
The ADB's revised growth forecast for FY25 aligns with the projections made by the Reserve Bank of India (RBI) in its recent statement. The RBI had forecasted GDP growth of 7% for the current fiscal year, citing factors such as expectations of a normal monsoon, moderating inflationary pressures, and sustained momentum in manufacturing and services sectors.
This upward revision in GDP growth forecast reflects the resilience of the Indian economy amidst global challenges and underscores the importance of continued policy support to sustain growth momentum.
