ADB keeps India's GDP growth projection at the same level of 7% for FY2024-25

Asian Development Bank (ADB), in its latest report, has kept India’s GDP forecast at 7 per cent for fiscal year 2024-25. Its projection is same as the International Monetary Fund’s (IMF) projection of 7 per cent, but less than the central bank's estimate of 7.2 per cent. 

“India’s industrial sector is projected to grow robustly, driven by manufacturing and strong demand in construction. Agriculture is expected to rebound amid forecasts for an above-normal monsoon, while investment demand remains strong, led by public investment,” the Manila-based bank said in the latest edition of Asian Development Outlook. It has also maintained its growth forecast at 7.2 per cent for fiscal year 2025-26.

The bank said in its report that this must be “weighed against downside risks” arising from weather events and geopolitical shocks.

India's industrial sector is expected to experience significant growth, primarily fueled by the manufacturing industry and a high demand in the construction sector, particularly in housing, as stated in the July Outlook report. The agriculture sector is anticipated to recover due to predictions of an above-average monsoon season, and investment demand continues to be vigorous, fueled by public investments.

“Bank credit is fueling robust housing demand and improving private investment demand. However, export growth will continue to be led by services, with merchandise exports showing relatively weaker growth,” the bank said. 

The report said that forward-looking services PMI was well above its long-term average. 

India's GDP expanded at a rate of 8.2 per cent in the financial year 2024, surpassing the 7 per cent growth seen in FY23. This growth was notably supported by a higher-than-expected expansion of 7.8 per cent in the fourth quarter, as per the initial GDP growth estimates published by the National Statistical Office (NSO).

Looking ahead to the next fiscal year, the Reserve Bank of India (RBI) has forecasted a 7.2 per cent growth for the Indian economy in FY25. RBI Governor Shaktikanta Das emphasized in a recent statement that India stands at the verge of a significant structural transformation in its growth trajectory. He expressed confidence in the nation's progression towards a sustainable path where an annual GDP growth rate of 8 per cent could be maintained over an extended period.

On Tuesday, the International Monetary Fund (IMF) raised India’s GDP growth projection for FY25 by 20 basis points to 7 per cent amid a boost to private consumption, especially in rural areas.

IMF noted that the forecast for growth in emerging markets and developing economies is revised upward; the projected increase is powered by stronger activity in Asia, particularly China and India. 

“The forecast for growth in India has been revised upward to 7 per cent this year, with the change reflecting carry over from upward revisions to growth in 2023 and improved prospects for private consumption, particularly in rural areas,” it said in its outlook report.

In its report, ADB marked China's growth forecast at 4.8 per cent for this year. A continued recovery in services consumption and stronger-than-expected exports and industrial activity are supporting the expansion, even as the China’s struggling property sector has yet to stabilise. The government introduced additional policy measures in May to support the property market, it said.

For overall Asia, it slightly raised its economic growth forecast for developing Asia and the Pacific this year to 5 per cent from a previous projection of 4.9 per cent, as rising regional exports complement resilient domestic demand. The growth outlook for next year is maintained at 4.9 per cent “Inflation is forecast to slow to 2.9 per cent this year amid easing global food prices and the lingering effects of higher interest rates,” the agency said.

For the Asia-Pacific region, ADB has slightly raised its economic growth forecast for 2024 to 5 per cent from a previous projection of 4.9 per cent, as rising regional exports complement resilient domestic demand. The growth outlook for 2025 is maintained at 4.9 per cent.