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Informist, Wednesday, Sep 25, 2024

 

NEW DELHI – The Asian Development Bank today retained its forecast for India's GDP growth in 2024-25 (Apr-Mar) at 7.0% and for the next financial year at 7.2%. India's GDP grew 6.7% in Apr-Jun and 8.2% in 2023-24.

 

The multilateral bank raised its inflation forecast to 4.7% from 4.6% on the back of higher food prices. CPI inflation was 3.65% in August, thanks to a favourable base effect, but is expected to rise again in Oct-Mar.  

 

This, it said, had prevented the central bank from adopting a more accommodative monetary policy. "If improved agricultural supply leads to moderating food price increases, the central bank may begin lowering policy rates in 2024-25, enhancing prospects for credit expansion," ADB said in its September edition of the Asian Development Outlook report.

 

ADB said inflation could turn out to be lower than forecast, as food prices might come down due to improvements in the supply of agricultural products. The RBI forecasts inflation to average 4.5% in Oct-Mar.

 

"India's economy has shown remarkable resilience in the face of global geopolitical challenges and is poised for steady growth," ADB Country Director for India Mio Oka said in a release. "Agricultural improvements will enhance rural spending, which will complement the effects of robust performance of the industry and services sectors."

 

ADB's growth forecast for 2024-25 remains lower than the Reserve Bank of India's estimate of 7.2%. On Tuesday, S&P Global Ratings kept its India economic growth forecast unchanged at 6.8%.

 

Agricultural growth is expected to improve on the back of above-average monsoon rainfall in most parts of the country, which in turn will strengthen the rural economy this financial year, ADB said.

 

The report maintained its positive outlook for the industry and the services sectors, private investment, and urban consumption for the current year and 2025-26.

 

The outlook for the industrial sector remains positive even as growth has slowed somewhat, because of rising input prices reducing margins in the manufacturing sector, offsetting gains in mining and construction, ADB said. 

 

ADB expects the employment-linked incentive schemes announced in the Budget in July to support job creation starting next year.

 

The risks to India's near-term growth include geopolitical shocks that could disrupt global supply chains, a rise in commodity prices, and weather-related risks to agricultural output, ADB said. 

 

The growth outlook is also contingent on the government achieving its capital expenditure target for the current year, ADB said. The government has set a capital expenditure target of 11.11 trln rupees for 2024-25, and has already spent 23.5%, or 2.61 trln rupees, of the full-year target so far. 

 

ADB said these risks to India's growth outlook could be offset by higher foreign direct investment, "which could support growth and investment, particularly in manufacturing".

 

The multilateral bank lowered its forecasts for India's current account deficit to 1.0% of GDP in 2024-25 and 1.2% next year from the previous forecast of 1.7% for both years due to better exports, lower imports, and strong remittance inflows.

 

It expects the central government's debt to decline to 56.8% of GDP in 2024-25 from 58.2% in 2023-24. The general government deficit, which includes state governments, is expected to fall below 8% of GDP this year, ADB said.  End

 

Reported by Shubham Rana

Edited by Avishek Dutta

 

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