ADB retains India's growth forecast at 7% for FY'25

New Delhi: The Asian Development Bank (ADB) on Wednesday maintained India's GDP growth forecast at 7 percent for the current financial year, citing that a rebound in agriculture is expected given above-normal monsoon projections.

The ADB forecast comes a day after the International Monetary Fund revised upward its GDP growth projections for India to 7 percent compared to 6.8 percent projected in April.

Last month, the Reserve Bank of India (RBI) revised upward its growth forecast to 7.2 percent, from 7 percent estimated earlier.

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The Indian economy is on track to grow by 7 percent in FY 2024 (ending 31 March 2025) and 7.2 percent in FY 2025 (next financial year), as projected in ADO April 2024, said the July edition of the Asian Development Outlook (ADO).

The Indian economy logged a growth rate of 8.2 percent for the financial year ended March 2024, as against 7 percent in the previous fiscal year.

Services continued to expand robustly in Q4 of FY'24, and the forward-looking services PMI is well above its long-term average, it said, adding, industry is also expected to grow robustly, driven by manufacturing and strong demand for construction led by housing, it said.

"After muted growth in FY2023 (previous fiscal), a rebound in agriculture is expected given the above-normal monsoon projections. This is notwithstanding the slower advance of monsoon in June. A rebound in agriculture will be important to sustain growth momentum in rural areas," it said.

Investment demand continues to be strong, led by public investments and bank credit is fueling robust housing demand and improving private investment demand, it said.

However, it said, export growth will continue to be led by services, with merchandise exports showing relatively weaker growth.

The stronger-than-expected fiscal position of the central government could provide a further boost to growth, it said.

However, the report said, this must be weighed against downside risks arising from weather events and geopolitical shocks.

With regard to inflation, ADO has also retained its forecast at 4.6 percent for the current financial year and expects it to marginally decline to 4.5 percent next fiscal.

With regard to developing Asia's growth forecast, ADO said, it is revised up to 5 percent in 2024 and maintained at 4.9 percent in 2025.

Growth projections remain broadly unchanged with respect to ADO April 2024, it said, adding, resilient domestic demand along with improved exports and manufacturing will support growth this year.

The region's 2024 growth forecast has been marginally adjusted up by 0.1 percentage points due to upward revisions in the Caucasus and Central Asia along with East Asia, it said.

Meanwhile, the inflation forecast for the region has fallen to 2.9 percent in 2024, largely due to downward revisions in China and the Caucasus and Central Asia, which offset a slight increase in South Asia, it said.

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