ADB Revises India's Growth Projection to 6.7% for FY24

The Asian Development Bank (ADB) has adjusted India’s growth projection for the current financial year, FY24, from 6.3% to a more optimistic 6.7%, citing a robust second-quarter performance that exceeded expectations.

Q2 FY24 Performance

The second quarter witnessed a higher-than-anticipated GDP growth of 7.6%, propelling the overall growth for the first half (April-September) to an impressive 7.7%, as revealed in the Asian Development Outlook December 2023.

Sectoral Growth

Economic indicators highlight substantial growth in the industrial sector, encompassing manufacturing, mining, construction, and utilities, with double-digit expansion.

Factors Influencing Projection

Agriculture’s growth is anticipated to be slightly slower, but the industrial sector’s stronger-than-expected performance more than compensates for it.
On the demand side, increased capital spending by both central and state governments is expected to drive higher growth in fixed investment, offsetting lower growth in private consumption expenditure and weaker-than-expected exports.

RBI’s Alignment

The Reserve Bank of India (RBI) recently revised its growth estimate for FY24 to 7%, aligning with the ADB’s positive outlook.

FY25 Outlook

For the next financial year, FY25, ADB maintains its growth forecast for India at 6.7%.

Calendar Year Performance: India’s growth surged to 7.1% in the first three quarters of the calendar year, propelled by robust industrial production and increased investment.

Regional and Global Context

The boost from post-pandemic reopening in most Southeast Asian economies is diminishing.
Merchandise goods exports from high-income technology exporters remain subdued but stable.

Inflation Outlook

Inflation forecasts remain steady at 5.5% for the current financial year, aligning with the RBI’s projection of 5.4% for FY24.

Important Questions Related to Exams

Q: Why did the ADB revise India’s growth forecast for FY24?

A: The Asian Development Bank upgraded India’s growth projection to 6.7% from 6.3% due to a robust 7.6% GDP growth in Q2 and strong industrial sector performance in H1.

Q: What contributed to the first-half growth of 7.7%?

A: The first-half expansion was driven by double-digit growth in the industrial sector, including manufacturing, mining, construction, and utilities.

Q: How is the demand-side dynamics shaping up for FY24?

A: Higher growth in fixed investment, fueled by increased capital spending from both central and state governments, is expected to offset lower growth in private consumption and weaker-than-expected exports.

Q: What’s the outlook for FY25?

A: ADB maintains a growth forecast of 6.7% for FY25, indicating a sustained positive outlook for India’s economic performance.

Q: How has India’s inflation outlook been assessed?

A: The inflation forecast for FY24 is 5.5%, consistent with the Reserve Bank’s projection of 5.4%, and the report indicates that India’s inflation forecasts align with recent data and expectations.