NEW DELHI : The Asian Development Bank (ADB) has upgraded India’s gross domestic product (GDP) growth forecast for financial year 2024 from 6.7 per cent to 7 per cent and 7.2 per cent in financial year 2025.
The upward revision in the economic growth forecasts are driven by robust public and private investment and strong services sector, as per the regional development bank, which released its flagship economic publication, Asian Development Outlook (ADO) April 2024, on Thursday.
The triggers for growth in financial year 2024 will come from higher capital expenditure on infrastructure development both by central and state governments, rise in private corporate investment, strong service sector performance and improved consumer confidence.
Growth momentum will pick up in financial year 2025 backed by improved goods exports and an increase in manufacturing productivity and agricultural output.
India’s GDP grew at a massive 8.4 per cent during the October-December quarter of the current financial year 2023-24 and the country continued to remain the fastest-growing major economy. The Indian economy grew 7.8 per cent and 7.6 per cent during the preceding two quarters – April-June and July-September.
India’s economy grew 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22, respectively.
“Notwithstanding global headwinds, India remains the fastest growing major economy on the strength of its strong domestic demand and supportive policies,” said ADB Country Director for India Mio Oka.
“The Government of India’s efforts to boost infrastructure development while undertaking fiscal consolidation and provide an enabling business environment will help in increased manufacturing competitiveness to augment exports and drive future growth.”
A healthy rise of 17 per cent in central government capital expenditure in financial year 2024 compared to the previous fiscal year together with transfers to state governments will boost infrastructure investment, ADB said.
The government’s new initiative to support urban housing for middle-income households is expected to further spur housing growth. Private corporate investment is expected to get a boost with stable interest rates. With inflation moderating to 4.6 per cent in financial year 2024 and easing further to 4.5 per cent in financial year 2025, monetary policy may become less restrictive, which will facilitate rapid offtake of bank credit.
Demand for financial, real estate and professional services will grow while manufacturing will benefit from muted input cost pressures that will boost industry sentiment. Expectations of a normal monsoon will help boost growth of the agriculture sector, ADB said.
The government’s focus on fiscal consolidation, with a targeted deficit of 5.1 per cent of GDP for FY2024 and 4.5 per cent for FY2025, will enable the government to reduce its gross marketing borrowing by 0.9 per cent of GDP in FY2024 and create further room for private sector credit.
India’s current account deficit will widen moderately to 1.7 per cent of GDP on rising imports for meeting domestic demand.
ADB said foreign direct investment will be affected in the near term due to tight global financial conditions but will pick up in FY2025 with higher industry and infrastructure investment. Goods exports will also be affected by lower growth in advanced economies but pick up in FY2025 as global growth improves, the ADB report said. (ANI)
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