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.