India’s stronger than expected fiscal position could provide a further boost to its growth, the Asian Development Bank (ADB) said on Wednesday while keeping the Gross Domestic Product (GDP) growth projection for FY25 unchanged at 7 per cent.
“However, this must be weighed against downside risks arising from weather events and geopolitical shocks,” ADB’s report added.
India’s industrial sector is projected to grow robustly, driven by manufacturing and strong demand in construction led by housing, the ADB said in its July Outlook. Agriculture, it said, is expected to rebound amid forecasts for an above-normal monsoon, while investment demand remains strong, led by public investment.
“Bank credit is fuelling robust housing demand and improving private investment demand. However, export growth will continue to be led by services, with merchandise exports showing relatively weaker growth,” ADB’s report said.
The report said that forward-looking services Purchasing Managers’ Index (PMI) is well above its long-term average.
The International Monetary Fund (IMF) on Tuesday had raised India’s GDP growth projection for FY25 by 20 basis points to 7 per cent in its update to the World Economic Outlook (WEO) amid a boost to private consumption, especially in rural areas.
For FY26, ADB has maintained India’s GDP growth projection at 7.2 per cent, as stated in its April Outlook.
The GDP expanded at 8.2 per cent in the 2023-24 financial year, higher than 7 per cent recorded in 2022-23, aided by a greater-than-expected expansion of 7.8 per cent in the fourth quarter, according to the provisional estimates of GDP growth released by the National Statistical Office (NSO).
The Reserve Bank of India has projected the Indian economy to grow at 7.2 per cent in FY25.
RBI governor Shaktikanta Das last month said that India is at the threshold of a “major structural shift” in its growth trajectory. He said that the country is moving towards a path where 8 per cent GDP growth can be sustained on a yearly basis for a longer term.
ADB has slightly raised its economic growth forecast for developing Asia and the Pacific for 2024 to 5 per cent from a previous projection of 4.9 per cent, as rising regional exports complement resilient domestic demand. The growth outlook for 2025 is maintained at 4.9 per cent.
First Published: Jul 17 2024 | 5:09 PM IST
