ADB Optimistic About India’s Economic Prospects Anticipates 7% Growth in FY25

The Asian Development Bank (ADB) has revised its economic growth outlook for India, setting an optimistic forecast for the fiscal year 2024-25. The recent update brings good tidings to stakeholders and policy makers, as the new projection indicates that India’s gross domestic product (GDP) is expected to expand by a robust 7 percent. This marks an improvement from the ADB’s earlier estimate of 6.7 percent.

According to the ADB’s analysis, this upward trajectory can be attributed to a combination of vital factors that include increased investment demands from both public and private sectors, coupled with a gradual upswing in consumer demand. These elements are essential drivers that are expected to continue to underpin the subcontinent’s economic performance.

However, it is noteworthy that the anticipated growth rate for FY24-FY25 is somewhat tempered when compared to the previous fiscal year. In fiscal 2022-23, the Indian economy recorded a 7.6 percent growth, largely powered by significant investment, although consumer spending during that period remained somewhat subdued.

Back in December of the previous year, the ADB had been more conservative with its outlook, suggesting the Indian economy would see a 6.7 percent increase in 2024-25. However, recent insights have led to a more positive revision. The April edition of the Asian Development Outlook, a publication responsible for delivering these revised figures, outlined a robust economic expansion in fiscal 2023, bolstered by strong manufacturing and service sectors’ performance. This positive momentum is projected to maintain its pace, supporting rapid growth over the subsequent years.

While the growth is expected to moderate somewhat in the immediate future, the forecast for fiscal 2025-26 reveals further cause for optimism with an estimated rate of 7.2 percent. ADB attributes this sustained growth to a conducive monetary policy that will likely continue to be supportive as inflationary pressures ease. Furthermore, fiscal policies are anticipated to pursue consolidation while maintaining a focus on capital investment.

The export sector is flagged as an area likely to exhibit less dynamism in the current fiscal as the advanced economies experience slowdowns. However, better times are on the horizon for exports in FY25, per the ADB’s projections. To bolster India’s export capabilities over the medium term, the ADB suggests that a more profound integration into global value chains would be beneficial.

This latest appraisal by the ADB aligns with predictions from the Reserve Bank of India (RBI). Last week, the RBI projected a similar 7 percent growth for the current fiscal, buoyed by the expectations of a normal monsoon, the softening of inflationary pressures, and sustained growth in both the manufacturing and services sectors.

While this update offers a promising outlook for India’s economic health, challenges remain. There are external headwinds such as potential volatility in the international markets, uncertainties surrounding the pace of global economic recovery, and geopolitical tensions that could have a bearing on the ADB’s forecasts coming to fruition.

Despite these potential obstacles, the overall sentiment towards India’s economic prospects remains decidedly positive. The increased growth forecasts by reputable institutions like the ADB and RBI serve as a testament to the country’s resilience and the efficacy of the measures undertaken by policymakers to foster a stable and growing economic environment. With a focus on investment and consumption, and with supportive fiscal and monetary policies, India appears well-positioned to continue its trajectory of robust economic growth into the next fiscal years.