Asian Development Bank ups India’s growth forecast to 7%, expects inflation to dip

iNDICA NEWS BUREAU–

The Asian Development Bank (ADB) on Thursday raised India’s GDP growth forecast for 2024-25 to 7 per cent as it expects public and private sector investment along with a gradual improvement in consumer demand to drive up the growth rate. The ADB had in December projected India’s economic growth rate at 6.7 per cent for the 2024-25 financial year. The ADB also expects India’s inflation rate to come down going ahead.

“The Indian economy grew robustly in fiscal 2023 with strong momentum in manufacturing and services. It will continue to grow rapidly over the forecast horizon. Growth will be driven primarily by robust investment and improving consumption demand. Inflation will continue its downward trend in tandem with global trends,” the April edition of the Asian Development Outlook says.

For the 2025-26 fiscal, the ADB has forecast India’s growth at 7.2 per cent. The multilateral institution said exports are likely to be relatively muted this fiscal as growth in major advanced economies slows down but will improve in FY2025.

“Monetary policy is expected to remain supportive of growth as inflation abates, while fiscal policy aims for consolidation but retains support for capital investment. On balance, growth is forecast to slow to 7 per cent in 2024-25 but improve to 7.2 per cent in 2025-26,” it said.

To boost exports in the medium term, India needs greater integration into global value chains, the report added.

The increase in the ADB’s growth forecast is in line with the IMF and World Bank which have also raised their estimates for India’s growth with the economy clocking a robust 8.4 per cent growth rate in the October-December quarter. The country’s exports have also increased despite geopolitical tensions in the Red Sea region which have disrupted shipping.

India’s foreign exchange reserves have risen to a historic high of $645.58 billion for the week ended on March 29 and are sufficient to finance up to 11 months of imports.

The macroeconomic fundamentals of the economy have turned stronger with the fiscal deficit well in control following robust tax collections. The lower fiscal deficit will help control inflation as well as leave more money in the banking system for corporates to take loans for investments as the government needs to borrow less.

The big-ticket government investments in large infrastructure projects such as highways, ports and seaports have accelerated GDP growth, making India a bright spot amid the global slowdown.

Inflation has come down to around 5 per cent and is expected to fall further which is paving the way for stable economic growth ahead.

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