India’s Economic Growth to Slow Down to 6.4% in 2023-24: ADB Report

ADB: India’s Growth to Moderate Due to Global Slowdown

The Asian Development Bank (ADB) has projected a moderate economic growth rate for India due to various factors such as a global slowdown, tight monetary conditions, and elevated oil prices. According to the latest ADB outlook, India’s economic growth rate is expected to reach 6.4% in 2023-24 from 6.8% in FY23, while the growth forecast for the current year has been revised downwards to 6.4% from 7.2% earlier projected. However, India’s economic growth rate is still stronger than many peer economies and reflects robust domestic consumption and less dependence on global demand.

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Private Consumption and Investment to Drive India’s Future Growth: ADB

ADB country director for India Takeo Konishi has mentioned that India’s future growth would be driven by private consumption and investment, and the government’s infrastructure push, logistics development, and industrial corridor development will contribute significantly to raising industrial competitiveness. The report has appreciated the government’s commitment to fiscal prudence and budgeting higher capital investment for the coming year. ADB has also highlighted that geopolitical tensions and weather-related shocks are the key risks to India’s outlook.

ADB Expects Goods Exports to Improve from Next Year in India

Furthermore, ADB expects that recovery in tourism and contact-intensive sectors would help service sector growth, while manufacturing growth would take off only from 2024-25. Goods exports are expected to improve from next year as production-linked incentive schemes and efforts to improve the business environment bear fruit, leading to improved performance in electronics and other areas of manufacturing growth.

India’s Inflation to Decline to 5% in 2023-24: ADB Report

ADB has also projected a decline in inflation, assuming that food and oil prices remain low, and expects the inflation rate to decline to 5% in 2023-24 and further to 4.5% in the next year. Tighter monetary policy is expected to persist in the current fiscal, with the Reserve Bank of India expected to raise rates by 0.25 percentage points to 6.75% on April 6. Accommodation is expected to take place next fiscal.

However, ADB raised concerns about states’ quality of expenditure and off-budget borrowings, indicating that states had not followed the Centre’s approach of increasing infrastructure and health expenditure. Finally, the report indicates that the opening of China is a brightening outlook for Asia and the global economy, with growth expected to return to pre-pandemic levels in the coming year. However, financial stability risks and the escalation of the Russia-Ukraine conflict could still hold back recovery.

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