The Asian Development Bank (ADB) has projected India’s economic growth at 7% for the financial year 2024 and 7.2% for FY2025, stating that the country’s economy remains strong. ADB’s Country Director for India, Mio Oka, said that India has displayed resilience in the face of global geopolitical challenges and is set for steady expansion. Oka added that improvements in agriculture are expected to boost rural spending, complementing the robust performance of the industry and services sectors.
In its September edition of the Asian Development Outlook (ADO), ADB reported that a favorable monsoon across most regions of India is expected to lead to strong agricultural output, positively impacting the rural economy in FY2024. Additionally, the report holds an optimistic view of the industry and services sectors, private investments, and urban consumption for both FY2024 and FY2025.
The new government policy offering employment-linked incentives to workers and firms is expected to increase labor demand and support job creation beginning in FY2025.
The report says “With the government’s fiscal consolidation efforts, central government debt is projected to decrease from 58.2% of GDP in FY2023 to 56.8% in FY2024. The general government deficit, which includes state governments, is expected to fall below 8% of GDP in FY2024.”
However, consumer inflation is expected to rise to 4.7% in FY2024 due to higher food prices, despite an increase in agricultural output. ADB noted that inflation has kept the Reserve Bank of India (RBI) from lowering policy interest rates. Should agricultural supply improve and food prices moderate, the central bank may consider easing interest rates in FY2024, which could facilitate credit expansion.
India’s current account deficit is forecast to be 1.0% of GDP in FY2024 and 1.2% in FY2025, down from the previous estimate of 1.7% for both years. This reduction is attributed to improved exports, lower imports, and strong remittance inflows.
“These risks may be offset by higher foreign direct investment, which could support growth and investment, particularly in manufacturing. Additionally, improvements in the supply of agricultural products may reduce food prices, potentially lowering consumer inflation below the forecast,” ADB says.
(ANI)
