ADB maintains India’s growth forecast at 7%
New Delhi| The Asian Development Bank (ADB) on Wednesday maintained India’s growth forecast for the current financial year at seven percent and said better agricultural production and higher government spending are expected to boost the economy in the coming quarters.
In its Asian Development Outlook (ADO) update for September, ADB said exports in the current financial year will be higher than previously estimated, thanks to growth in services exports. However, according to ADB, export growth of goods will remain relatively slow in the next financial year. “GDP growth is expected to be seven percent in FY2024 (FY2024, ending March 31, 2025) and 7.2 percent in FY2025, both projections are as forecast in April 2024”, ADB said The bank also said that India’s growth prospects remain strong.
The Indian economy grew 8.2 percent in the last fiscal year (2023-24). RBI has estimated a growth of 7.2 percent in the current financial year. It said GDP growth slowed to 6.7 percent in Q1 FY2024 (April-June), but is expected to accelerate in the coming quarters with a recovery in agriculture and a substantially stronger outlook for industry and services.
According to ADB, private consumption in India is also expected to improve. According to ADB, rural consumption will be driven by strong agriculture and by already strong urban consumption. The outlook for private investment is positive, but growth in public capital spending, which has been high so far, will slow in FY2025.
ADB said fiscal consolidation efforts will push the fiscal deficit to pre-Covid-19 levels, reflecting strong revenue collection and restrained current spending. The Asian Development Bank said in its projections that the recent policy announcement offering employment-linked incentives to workers and firms could boost labor demand and boost job creation from FY2025.
Three employment-related incentive schemes have been announced in Budget 2024-25 and it is stated that the government will allocate Rs 2 lakh crore to implement them. “Growth slowed on a year-on-year basis in Q1 FY2024 (Q1), but is expected to improve in the coming months due to better agricultural performance and more government spending”, ADB said.
“The performance of the industry and the service sector is expected to continue to be strong”, ADB said strong services exports and remittances will keep the current account deficit moderate. The increased prices of food items will mean that inflation in the current financial year will be higher than previously estimated, but inflation will come down in the next financial year.