ADB Maintains India's FY25 GDP Growth Projection At 7% Amid Economic Resilience

As per ADB's outlook in July, India's agriculture sector is anticipated to recover, supported by predictions of an above-normal monsoon, thereby playing a crucial role in maintaining economic growth

The Asian Development Bank (ADB) maintained its forecast for India's gross domestic product (GDP) growth in FY25 at 7 per cent on Wednesday. The decision was based on the strong expansion in the industrial sector and robust demand in construction, mainly driven by housing. “The stronger-than-expected fiscal position of the central government could provide a further boost to growth. However, this must be weighed against downside risks arising from weather events and geopolitical shocks,” said ADB.

According to ADB's outlook in July, India's agriculture sector is anticipated to recover, supported by predictions of an above-normal monsoon, thereby playing a crucial role in maintaining economic growth in rural regions. The report also highlighted that strong investment demand, mainly driven by public investments, continues to push economic activity.

“Bank credit is fueling robust housing demand and improving private investment demand. However, export growth will continue to be led by services, with merchandise exports showing relatively weaker growth,” said ADB.

The report noted that the services purchasing managers' index (PMI), which looks ahead, is significantly higher than its long-term average.

In its latest update to the World Economic Outlook, the International Monetary Fund (IMF) increased India’s GDP growth forecast for FY25 by 20 basis points to 7 per cent, driven by a rise in private consumption, particularly in rural areas.

For FY26, the ADB upheld its GDP growth forecast for India at 7.2 per cent, consistent with its earlier projection in April.

In FY24, the GDP expanded by 8.2 per cent, surpassing the 7 per cent growth recorded in FY23, driven by a stronger-than-expected 7.8 per cent expansion in the fourth quarter, according to provisional estimates from the National Statistical Office.

The Reserve Bank of India (RBI) has projected a 7.2 per cent growth rate for the economy in FY25. RBI Governor Shaktikanta Das stated last month that India stands on the verge of a significant structural transformation in its growth trajectory. He emphasised that the country is progressing towards sustaining an annual GDP growth of 8 per cent over the long term.

Meanwhile, the Asian Development Bank (ADB) has marginally raised its growth forecast for developing Asia and the Pacific in 2024 to 5 per cent, up from the previous projection of 4.9 per cent. This adjustment reflects increased regional exports complementing resilient domestic demand. The growth outlook for 2025 remains unchanged at 4.9 per cent.