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Informist, Wednesday, Jul 17, 2024

 

NEW DELHI - The Asian Development Bank today left its forecast for India's GDP growth unchanged at 7.0% for the current financial year started April, and also retained the growth projection of 7.2% for 2025-26. The Indian economy grew 8.2% in 2023-24.

 

"India's industrial sector is projected to grow robustly, driven by manufacturing and strong demand in construction," the multilateral agency said in its July edition of the Asian Development Outlook report. "Agriculture is expected to rebound amid forecasts for an above-normal monsoon, while investment demand remains strong, led by public investment."

 

On Tuesday, the International Monetary Fund raised its forecast for India's GDP growth in the current financial year by 20 basis points to 7.0% on the back of improved prospects for private consumption, especially in rural areas.

 

The growth forecasts of both the ADB and the IMF for this year are, however, lower than the Reserve Bank of India's estimate of 7.2%. 

 

The Indian economy is doing well on multiple fronts. Services continued to expand robustly in Jan-Mar, industry is expected to grow robustly, and agricultural activity is expected to pick up after muted growth last year given the projections of above-normal monsoon rains, the ADB said. "A rebound in agriculture will be important to sustain growth momentum in rural areas."

 

Credit growth is fuelling robust housing demand and improving private investment demand, the report said. Export growth, however, will continue to be led by the services sector, as merchandise exports will remain weak, it said.

 

The stronger-than-expected fiscal position of the central government could also provide a further boost to growth. "However, this must be weighed against downside risks arising from weather events and geopolitical shocks," the ADB said.

 

The multilateral bank also kept India's inflation projections for this year unchanged at 4.6%, which is 10 bps higher than the RBI's forecast of 4.5%. Headline CPI inflation had averaged 5.4% in 2023-24. The ADB projects inflation to moderate to 4.5% in 2025-26.

 

The ADB slightly raised its economic growth forecast for developing Asia in 2024 to 5.0% from the earlier projection of 4.9%, as "rising regional exports complement resilient domestic demand." The growth outlook for 2025 is maintained at 4.9%. The region's economy is projected to have grown 5.1% in 2023.

 

"Most of Asia and the Pacific is seeing faster economic growth compared with the second half of last year," ADB's Chief Economist Albert Park was quoted as saying in a press release. "The region's fundamentals remain strong, but policy makers still need to pay attention to a number of risks that could affect the outlook, from uncertainty related to election outcomes in major economies to interest rate decisions and geopolitical tensions," Park said.

 

The multilateral body also kept China's growth forecasts for 2024 and 2025 unchanged at 4.8% and 4.5%. "The PRC (People's Republic of China) economy grew by 5.3% year-on-year in Q1 2024 (Jan-Mar), driven by continued recovery in services consumption and stronger-than-expected exports and industrial activity growth," the ADB said.

 

"The strong start of the year supported growth momentum, surpassing earlier expectations. However, the property market has not stabilised as earlier expected," it said. "Continued policy support and the export recovery should help offset challenges from increased trade tensions and the property market".  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani

 

 

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