ADB maintains 7 percent growth forecast for India, economy expected to pick up due to agricultural output and government spending

The Asian Development Bank (ADB) on Wednesday maintained India’s growth estimate for the current fiscal year at 7% and said that increased government investment and better agricultural production are projected to cause the economy to pick up speed in the next quarters.

Tuesday saw S&P Global Ratings maintain its 6.8% growth prediction for India’s current fiscal year. When the RBI reviews its monetary policy in October, they anticipate that it will begin lowering interest rates.

S&P Global Ratings maintained its 6.9% GDP growth prediction for the fiscal year 2025–2026 in its assessment of the Asia Pacific economy. It said that strong growth in India would free up the Reserve Bank to concentrate on getting inflation under control.

The Asian Development Bank (ADB) predicted in September that exports in the current fiscal year will exceed initial projections, driven mostly by greater services exports. But for the next fiscal year, the rise in goods exports would be very subdued.

The ADB said that India’s development prospects are still strong and that “GDP growth is expected at 7% in fiscal year 2024 (FY2024, ending 31 March 2025) and 7.2% in FY2025, both as forecast in ADO April 2024.”

In the most recent fiscal year, the Indian economy expanded by 8.2% (2023–24). According to RBI projections, growth will be 7.2% in the current fiscal year.

It said that while GDP growth slowed to 6.7% in the first quarter of FY2024 (April–June), it is anticipated to pick up speed in the next quarters due to improvements in agriculture and generally positive outlooks for business and services.

It is anticipated that private consumption would rise, led by already high urban consumption and higher rural consumption fueled by agriculture.

While there is optimism over private investment, state capital expenditure growth, which was previously strong, is expected to slow down in FY2025.

The ADB said that strong tax collection and prudent current spending would likely result in the budget deficit being reduced to a level last seen prior to COVID-19.

It also said that a recent policy announcement providing employment-linked incentives to enterprises and individuals may increase labor demand and support job development beginning in FY2025.

Three employment-linked incentive programs were announced in the Budget 2024–25, and it was said that the government will provide Rs 2 lakh crore to put them into action.

In the first quarter (Q1) of FY2024, growth decreased year over year (yoy), but it is predicted to pick up in the next months due to better agricultural performance and more government investment.

Industry and services should continue to grow strongly, according to the ADB.

Strong service exports and remittances will contribute to the current account deficit’s further correction.

Because food costs are so high, inflation is expected to be greater in the current fiscal year than it was predicted to be, but it should decline in the next fiscal year.