The Asian Development Bank (ADB) on April 11 raised India's GDP growth forecast for the current fiscal to 7 percent from 6.7 percent earlier. The ADB said that India's robust growth will be driven by its investment in public and private sectors and an improvement in consumer demand.
In its April edition of the Asian Development Outlook, ADB said India would remain "a major growth engine" in the Asia and Pacific (APAC) region. For the 2025-26 fiscal, ADB has projected India's growth at 7.2 percent. Growth will be robust despite moderating in FY2024 and FY2025, it said.
The growth estimates for the current fiscal is lower than 7.6 percent estimated GDP expansion in 2022-23 fiscal. Strong investment drove GDP growth in the 2022-23 fiscal as consumption was muted, ADB said.
In December 2023, ADB had projected the Indian economy to expand by 6.7 percent in the 2024-25 fiscal.
"The 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 demand and improving consumption demand. Inflation will continue its downward trend in tandem with global trends," said the Asian Development Outlook.
ADB's growth forecast for the current fiscal is in line with the projections made by the Reserve Bank of India (RBI).
The RBI last week had said GDP growth in the current fiscal is projected at 7 per cent on expectations of normal monsoon, moderating inflationary pressures and sustained momentum in manufacturing and services sectors.
The triggers for growth in FY2024 will come from higher capital expenditure on infrastructure development both by central and state governments, rise in private corporate investment, strong service sector performance and improved consumer confidence, the ADB added.
Growth momentum will pick up in FY2025, backed by improved goods exports and an increase in manufacturing productivity and agricultural output, it said.
"Notwithstanding global headwinds, India remains the fastest growing major economy on the strength of its strong domestic demand and supportive policies," said ADB Country Director for India Mio Oka.
ADB said exports are likely to be relatively muted this fiscal, as growth in major advanced economies slows down but will improve in FY2025.
Unanticipated global shocks such as supply line disruptions to crude oil markets and weather shocks that impact agriculture output are key risks to India's economic outlook, it said.
The overall health of the banking sector remains robust with the sector continuing to show improved asset quality with gross non-performing assets declining to a 10-year low of 3.2 per cent at the end of September 2023.
For developing economies in Asia and the Pacific, ADB forecast GDP to expand by 4.9 percent on average this year, as the region continues its resilient growth amid robust domestic demand, improving semiconductor exports and recovering tourism.
"Policy makers should remain vigilant, however, as there are a number of risks. These include supply chain disruptions, uncertainty about US monetary policy, the effects of extreme weather, and further property market weakness in China," ADB said.
(With inputs from PTI)