ADB Holds India's Growth Forecast At 7%, Predicts Economic Boost In Upcoming Quarters

The ADB also projected that India's exports would exceed earlier estimates, driven by stronger services exports

The Asian Development Bank (ADB) has maintained its growth forecast for India at 7 per cent for the current fiscal year, citing improved agricultural output and increased government spending as key factors for economic acceleration in the coming quarters.

In its September update of the Asian Development Outlook (ADO), the ADB also projected that India's exports would exceed earlier estimates, driven by stronger services exports. However, growth in merchandise exports is expected to remain subdued into the next fiscal year.

According to the report, India's GDP growth is forecast at 7 per cent for fiscal year 2024 (FY24), which ends on March 31, 2025, and 7.2 per cent for FY25. These projections are in line with the ADO’s April 2024 forecast, indicating that India's growth prospects remain strong.

The Indian economy saw a growth rate of 8.2 per cent in the previous fiscal year (2023-24), while the Reserve Bank of India (RBI) has forecast growth of 7.2 for the current fiscal year.

Despite a slight slowdown in GDP growth to 6.7 per cent during the first quarter of FY24 (April-June), the ADB expects a rebound in the coming months, supported by improvements in agriculture and a positive outlook for the industrial and services sectors.

Private consumption is anticipated to rise, bolstered by stronger rural spending due to improved agricultural performance, as well as sustained robust urban consumption. While the outlook for private investment remains optimistic, the growth in public capital expenditure, which has been significant, is expected to moderate in FY25.

The ADB also highlighted that efforts towards fiscal consolidation are likely to reduce the fiscal deficit to levels seen before the Covid-19 pandemic, driven by strong revenue collection and controlled expenditure.

A new policy offering employment-linked incentives for workers and businesses could further boost labour demand and job creation from FY25 onward. The government has allocated Rs 2 lakh crore to implement three such schemes, announced in the Budget for 2024-25.

While India's year-on-year growth slowed in the first quarter of FY24, the ADB remains optimistic that it will pick up in the coming months, driven by better agricultural output and increased government spending. The industrial and services sectors are expected to continue performing well.

On the external front, the current account deficit is projected to remain moderate, supported by strong service exports and remittance inflows. However, elevated food prices may push inflation higher in the current fiscal year, though it is expected to ease in the next fiscal year, according to the ADB.