The Asian Development Bank (ADB) has revised India’s GDP growth forecast for the current fiscal year to 7%, up from the previous estimate of 6.7%. This positive outlook is attributed to robust investment from both the public and private sectors, coupled with improvements in consumer demand. ADB emphasizes that India will continue to serve as a major growth engine in the Asia-Pacific region.
Looking ahead, ADB projects India’s growth for the 2025-26 fiscal year to reach 7.2%, indicating sustained economic expansion despite moderating growth in FY2024 and FY2025.
Factors Driving Growth
The growth estimates for the current fiscal year remain slightly lower than the 7.6% GDP expansion witnessed in the 2022-23 fiscal year. Strong investment activities primarily drove growth during this period, as consumption levels were relatively subdued, according to ADB.
In line with the Reserve Bank of India’s (RBI) projections, ADB foresees GDP growth in the current fiscal year to be supported by factors such as normal monsoon expectations, easing inflationary pressures, and continued momentum in manufacturing and services sectors.
Future Growth Prospects
Looking beyond the current fiscal year, ADB anticipates growth momentum to pick up further in FY2025. This will be driven by factors such as enhanced goods exports, improved manufacturing productivity, and agricultural output.
Despite global challenges, ADB reaffirms India’s status as the fastest-growing major economy, backed by strong domestic demand and supportive policies. The institution emphasizes the need for greater integration into global value chains to boost exports in the medium term.
ADB underscores the importance of fiscal consolidation efforts by the Indian government, which include targeted deficit reduction measures for FY2024 and FY2025. These measures aim to create additional room for private sector credit and reduce the government’s gross borrowing.
Risks and Mitigation Strategies
ADB identifies potential risks to India’s economic outlook, including supply chain disruptions in crude oil markets and weather-related shocks affecting agriculture output. However, the institution highlights the robust health of India’s banking sector, with improved asset quality and declining non-performing assets.
ADB’s upward revision of India’s GDP growth forecast reflects confidence in the country’s economic resilience and potential for sustained growth in the coming years.
