ADB lowers FY24 GDP forecast to 6.3%, India Ratings raises it to 6.2%

The Asian Development Bank (ADB) and India Ratings and Research have released contrasting forecasts for India’s economic growth in the fiscal year 2024 (FY24). While ADB has lowered its projection to 6.3%, India Ratings has raised it to 6.2%. Here’s a breakdown of their assessments and key factors influencing these predictions:

ADB’s Revision: 6.3% GDP Growth in FY24

Monsoon Patterns Impact: ADB cites erratic monsoon patterns as a primary reason for revising India’s growth forecast down by 10 basis points to 6.3% for FY24. These patterns are expected to affect agricultural output.
Inflation Concerns: ADB also revised its inflation projection for India in FY24 to 5.5%, up from the previous 5%. Adverse weather conditions have led to food inflation, contributing to South Asia’s overall inflation rate. The continuation of the rice export ban could further escalate food price inflation.
Positive Outlook for FY25: Despite the downward adjustment for FY24, ADB maintains its growth projection for FY25 at 6.7%. This optimistic outlook is based on expectations of rising private investment and industrial output driving economic growth.

ADB lowers FY24 GDP forecast to 6.3%, India Ratings raises it to 6.2%

India Ratings and Research’s Perspective: 6.2% GDP Growth in FY24

Supporting Factors: India Ratings and Research has increased its FY24 growth estimate for India to 6.2%, up by 30 basis points. They attribute this upward revision to several factors:
- Government Capital Expenditure: Sustained government capital expenditure (capex) is expected to boost economic growth.
- Corporate and Banking Balance Sheets: Deleveraged corporate and banking balance sheets are contributing positively to the economic outlook.
- Global Commodity Prices: The likelihood of subdued global commodity prices is also seen as a favorable factor.
Challenges Ahead: India Ratings and Research acknowledges challenges facing the Indian economy, including:
- Global Headwinds: Exports may be impacted by global headwinds, affecting economic growth.
- Tighter Financial Conditions: Tighter financial conditions could lead to rising capital costs, potentially impacting investment.
- Fiscal Deficit Target: Meeting the government’s FY24 fiscal deficit target of 5.9% of GDP may be challenging due to slow gross tax collection growth.
Economic Trends: Despite a strong quarterly GDP growth of 7.8% in Q1 FY24, the expectation is for economic expansion to slow sequentially over the remaining quarters of FY24.
Private Capital Expenditure: There are signs of recovery in private capital expenditure, with new projects emerging in various states and sectors.