The Asian Development Bank (ADB) forecast a 7 per cent increase in India’s gross domestic product (GDP) for the financial year 2024 and 7.2 per cent for FY 2025.
The projections were outlined in the bank’s Asian Development Outlook report for September 2024.
It further indicated that above-average monsoon across much of India is expected to stimulate strong agricultural growth, positively impacting the rural economy in FY2024.
ADB maintained a positive outlook for the industrial and services sectors, along with private investments and urban consumption for both FY2024 and FY2025.
The global bank further said that a new government initiative providing employment-linked incentives for workers and companies could boost labour demand and facilitate job creation starting in FY2025.
The ADB report mentioned that due to the government’s efforts toward fiscal consolidation, central government debt is projected to decline from 58.2 per cent of GDP in FY2023 to 56.8 per cent in FY2024.
“The general government deficit, which includes state governments, is expected to fall below 8 per cent of GDP in FY2024,” it said.
Consumer inflation is expected to rise to 4.7 per cent in FY2024, driven by high food prices, despite the anticipated increase in agricultural output.
This situation has limited the central bank’s ability to implement a more lenient monetary policy. However, if improvements in agricultural supply lead to a decrease in food prices, the central bank may consider lowering policy rates in FY2024, which could foster credit expansion.
Mio Oka, ADB Country Director for India, said, “India’s economy has shown remarkable resilience in the face of global geopolitical challenges and is poised for steady growth. Agricultural improvements will enhance rural spending, which will complement the effects of robust performance of the industry and services sectors.”
On India’s current account deficit, it said that it is forecast to be 1 per cent of GDP in FY2024 and 1.2 per cent in FY2025, down from the previous forecast of 1.7 per cent for both years, due to better exports, lower imports, and strong remittance inflows.
Potential near-term growth risks include geopolitical tensions that could disrupt global supply chains and affect commodity prices, as well as weather-related challenges impacting agricultural production, the report highlighted.
The outlook assumes that the central government will meet its capital expenditure goals in FY2024.