Asian Development Bank has retained its gross domestic product growth forecast for India at 7% for the current fiscal, citing improved agricultural output and increased government spending as key drivers.
In its latest Asian Development Outlook update, ADB anticipates that the Indian economy will gain momentum in the upcoming quarters.
While merchandise export growth is expected to remain subdued, services exports, particularly IT, are projected to exceed earlier forecasts, contributing to a more favourable trade outlook, it said.
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For 2024, GDP growth is expected at 7%, with a slight increase to 7.2% next year.
The Indian economy demonstrated strong performance in the previous fiscal at 8.2%. However, the Reserve Bank of India projects a growth rate of 7.2% for the current fiscal, reflecting a slight deceleration to 6.7% in the first quarter of the current financial year.
Despite this slowdown, the economy is on track for recovery, driven by enhancements in agriculture and sustained strength in the industrial and services sectors, according to ADB.
Private consumption is anticipated to rise, bolstered by increased rural spending due to a stronger agricultural sector and resilient urban consumption. Investment prospects remain promising, although growth in public capital expenditure is expected to moderate in 2025.
ADB also noted efforts towards fiscal consolidation, which are projected to reduce the fiscal deficit to pre-Covid levels. This is attributed to robust revenue collection and restrained current expenditures.
A recent policy initiative offering employment-linked incentives is expected to further stimulate labour demand and job creation beginning in 2025.
Despite elevated food prices contributing to higher inflation in the current fiscal, ADB predicts a moderation in inflation rates in the subsequent fiscal. The current account deficit is expected to remain moderate, supported by strong service exports and remittances.
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