ADB Optimistic About India’s Economic Growth Projects 7% Expansion in FY25

The economic outlook for India appears brighter as the Asian Development Bank (ADB) upgraded its growth projections for the nation’s gross domestic product (GDP) for the fiscal year 2024-25. India, now anticipated to grow at 7%, has its previous figure of 6.7% eclipsed, demonstrating renewed confidence in its dynamic economy. The uplift comes with expectations of increased investment across both the public and private sectors, coupled with a steady revival in consumer demand.

Despite this optimism, the forecast for the 2024-25 financial year remains slightly subdued in comparison to the exceptional 7.6% growth projected for fiscal 2022-23. The prior period saw strong investment inflows serving as the key driver of economic growth, amidst a landscape of modest consumption levels, ADB reports indicated.

Previously, in December of the preceding year, ADB’s initial projection was more conservative, anticipating the Indian economy to expand at a rate of 6.7% during the 2024-25 fiscal period.

According to the Asian Development Outlook released in April, the robust growth trajectory is expected to continue, fuelled by significant factors. “The economy grew robustly in fiscal 2023 with strong momentum in manufacturing and services. It will continue to grow rapidly over the forecast horizon. Growth will be driven primarily by robust investment demand and improving consumption demand. Inflation will continue its downward trend in tandem with global trends,” the report elaborated.

While a moderation is acknowledged for both fiscal years 2024 and 2025, the fundamentals of the economy remain sound, with predictions for India’s GDP growth to clock in at 7.2% for the ensuing 2025-26 period.

Exports are projected to face headwinds this fiscal year, as economic momentum in leading advanced economies shows signs of ebbing. However, ADB foresees an improvement in the subsequent fiscal year, FY2025.

With nuances in India’s fiscal and monetary policies playing a role, ADB expects the overall economic environment to remain conducive to growth. “Monetary policy is expected to remain supportive of growth as inflation abates, while fiscal policy aims for consolidation but retains support for capital investment,” ADB’s analysis suggests. Accordingly, growth is anticipated to slow to seven percent in FY2024 before picking up to 7.2 percent in FY2025.

ADB’s commentary also highlights the significance of India bolstering its export sector to maintain medium-term economic momentum. It underscored the need for the country to foster a deeper integration into global value chains, which would be instrumental in maintaining an upward growth trajectory.

In alignment with the ADB’s standpoint, the Reserve Bank of India (RBI) shares similar growth expectations for India’s economy. Echoing the sentiment, RBI posited last week that India’s GDP growth for the current fiscal year would be seven percent. This projection is based on factors such as an anticipated normal monsoon, easing inflationary pressures, and sustained growth within the manufacturing and services sectors.

The overall assessment of India’s economic health by ADB reflects a blend of cautious optimism and recognition of underlying strengths. Notable is the balance the ADB strikes between recognizing the challenges of an evolving fiscal landscape and appreciating the robust investment demand that continues to underpin the nation’s growth. With careful monitoring and strategic economic planning, India is poised to maintain its place as a key engine of growth in the regional, if not the global, economy.

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