ADB Maintains India's Growth Forecast at 7% for FY24, Predicts Strong Outlook for FY25

The Asian Development Bank (ADB) on Wednesday maintained India's growth forecast for the current financial year at seven percent and said the economy is expected to pick up in the coming quarters on better agricultural output and higher government spending.

In its Asian Development Outlook (ADO) update for September, ADB said exports in the current financial year will be higher than previously estimated, thanks to an increase in services exports. However, according to ADB, export growth of goods will be relatively slow in the next financial year.

ADB said, "GDP growth is expected to be seven percent in FY24 (FY24, ending March 31, 2025) and 7.2 percent in FY25, both estimates are in line with the forecast in April 2024." The bank also said that India's growth prospects remain strong.

The Indian economy grew by 8.2 percent in the last financial year (2023-24). RBI has projected a growth of 7.2 percent in the current financial year. It said that GDP growth slowed to 6.7 percent in the first quarter of FY24 (April-June), but it is expected to accelerate in the coming quarters with improvement in agriculture and a largely strong outlook for industry and services.

According to ADB, private consumption in India is also expected to improve. According to ADB, rural consumption driven by strong agriculture and already strong urban consumption will be driven by. The private investment scenario is positive, but the growth in public capital expenditure, which has been high so far, will slow in FY25.

ADB said that fiscal consolidation efforts will bring the fiscal deficit to pre-Covid-19 levels, reflecting strong revenue collection and restrained current expenditure. The Asian Development Bank has said in its forecast that the recent policy announcement offering employment-linked incentives to workers and firms could boost labour demand and boost job creation from FY25.

The Budget 2024-25 has announced three employment-linked incentive schemes and said the government will allocate Rs 2 lakh crore to implement them. ADB said, "Growth slowed on a year-on-year basis in the first quarter (Q1) of FY24, but is expected to improve in the coming months due to better agricultural performance and more government spending.

ADB said, "Industry and services sector performance are expected to remain strong." Strong service exports and remittances will keep the current account deficit moderate. Higher food prices will mean that inflation will remain higher than previously estimated in the current financial year, but inflation will ease in the next financial year.