The Asian Development Bank (ADB), in its September 2024 Asian Development Outlook, projects India’s GDP growth at 7% for FY2024 and 7.2% for FY2025. The report attributes this sustained growth to the government’s fiscal consolidation efforts and resilience amidst global geopolitical challenges. ADB highlights agricultural improvements, robust performance in the industrial and services sectors, and rural spending as key growth drivers for FY2024. For FY2025, private investments, urban consumption, and job creation through employment-linked incentives are expected to further boost economic growth.
Debt Reduction and Inflation Outlook
Government efforts are set to reduce central government debt from 58.2% of GDP in FY2023 to 56.8% in FY2024. The general government deficit is projected to fall below 8% of GDP. Inflation is expected to rise to 4.7%, primarily driven by high food prices, though increased agricultural output could ease inflationary pressures, potentially allowing the central bank to lower policy rates and foster credit growth.
Current Account Deficit and External Risks
India’s current account deficit is forecasted to be 1% of GDP in FY2024 and 1.2% in FY2025, down from earlier estimates, due to stronger exports, lower imports, and remittance inflows. However, risks such as global supply chain disruptions, commodity price volatility, and weather-related agricultural challenges could impact growth. These risks may be mitigated by increased foreign direct investment and improvements in agricultural supply, which could also help reduce inflation.