NEW DELHI: The Asian Development Bank (ADB) has revised India’s growth forecast for the current financial year to 6.7%, citing stronger-than-expected second-quarter performance. This adjustment marks an increase from the previous projection of 6.3%, as revealed in the Asian Development Outlook December 2023 report released on Wednesday.
The second quarter of the fiscal year 2023-24 witnessed a remarkable GDP growth of 7.6%, propelling the cumulative growth in the first half (April-September) to an impressive 7.7%. The report highlights that the industrial sector, encompassing manufacturing, mining, construction, and utilities, experienced double-digit growth, contributing significantly to the overall economic expansion.
The forecast for the full fiscal year indicates a slightly slower growth in the agriculture sector, offset by the industry’s robust performance, justifying the upward revision. The report anticipates that higher growth in fixed investment, driven by increased capital spending by both the central and state governments, will compensate for lower growth in private consumption expenditure and weaker-than-expected exports.
The Reserve Bank of India (RBI) also revised its growth estimate last week, raising it to 7% from the earlier projection of 6.5% for FY24. This alignment in growth projections by two influential financial institutions underscores a positive outlook for India’s economic trajectory.
Looking ahead to the next financial year, FY25, the ADB maintains its growth forecast for India at 6.7%. The report indicates that India’s growth momentum accelerated to 7.1% in the first three quarters of the calendar year, primarily driven by robust industrial production and increased investment.
However, the report cautions that the boost from the post-pandemic reopening in most Southeast Asian economies is diminishing. Additionally, merchandise goods exports from high-income technology exporters, while stabilizing, remain subdued.
In terms of inflation, the ADB retained the forecast at 5.5% for the current financial year, in line with the Reserve Bank of India’s inflation projection of 5.4% for FY24. The report suggests that India’s inflation forecasts for 2023 and 2024 align with recent data and fall within expectations.
