ADB retains India's economic growth forecast for FY25 at 7%

The Asian Development Bank on Wednesday retained India's GDP growth forecast for the current financial year at 7 percent. Agriculture is likely to improve given above-normal monsoon forecasts. It said the ADB forecast came after the International Monetary Fund had revised its GDP growth forecast for India to 7 percent from the 6.8 percent projected in April.

Last month, the Reserve Bank of India cut its growth forecast to 7.2% from the 7% projected earlier. In the July edition of the Asian Development Outlook released today, it is expected that the Indian economy would grow at 7% in FY24 and at 7.2% in FY25 as projected by ADO in April 2024.

The economy of India expanded by 8.2% in the financial year to March 31, 2024, against 7% in the previous fiscal year.

Services continued to expand strongly in the fourth quarter of FY24, and the forward-looking services PMI is well above its long-term average. ADB expects that, in the future, the industry will grow at a strong pace on the back of robust demand from construction—manufacturing, and housing in particular.

"After slow growth in FY23, agriculture is expected to rebound given above-normal monsoon projections. This is despite the slow progress of the monsoon in June. A rebound in agriculture will be crucial to sustain the growth momentum in rural areas.

It said investment demand remains strong led by public investment and bank credit supporting strong housing demand and improving private investment demand. However, it said export growth will continue to be led by services, while merchandise exports are seeing relatively weaker growth.

It said the stronger-than-expected fiscal position of the central government could further boost growth. With regard to inflation, the ADO retained its forecast for the current fiscal year at 4.6% and expects it to ease marginally to 4.5% in the next fiscal.