New Delhi:

The Asian Development Bank (ADB) on Thursday raised India’s GDP growth forecast for the current fiscal year to 7% from the previous 6.7%, saying strong growth will be driven by public and private sector investment and improving consumer demand.

The ADB said in its April Asian Development Outlook that India would remain the Asia-Pacific region’s “main growth engine.”

ADB projects India’s economic growth in fiscal year 2025-26 to be 7.2%.

Growth will remain strong despite a slowdown in fiscal 2024 and fiscal 2025, the report said.

The growth forecast for the current fiscal year is lower than the 7.6% GDP growth forecast for the 2022-23 fiscal year. The ADB said strong investment boosted GDP growth in fiscal 2022-23 amid sluggish consumption.

The Manila-based multilateral agency had forecast in December that India’s economy would grow by 6.7% in the fiscal year 2024-25.

“The economy will grow strongly in FY2023, with strong momentum in the manufacturing and services sectors. The economy will continue to grow at a rapid pace during the forecast period. Growth will be mainly driven by strong investment demand and improving consumer demand. Inflation will continue to trend downward, a global trend “, “Asian Development Outlook” said.

ADB’s growth forecast for the current fiscal year is in line with that of the Reserve Bank of India (RBI).

The Reserve Bank of India said last week that GDP growth for the current fiscal year is expected to be 7% on expectations of a normal monsoon, easing inflationary pressures and continued growth momentum in the manufacturing and services sectors.

Triggers for growth in FY24 will come from increased capital expenditure by the central and state governments on infrastructure development, rising private sector investments, strong performance in the services sector and improving consumer confidence.

Growth momentum will pick up in fiscal 2025, supported by improvements in merchandise exports and increases in manufacturing productivity and agricultural output, the ADB said.

“Despite global headwinds, India remains the fastest-growing major economy on the back of strong domestic demand and supportive policies,” said ADB Country Director for India Mio Oka.

Okar said the Indian government’s efforts to promote infrastructure development while conducting fiscal consolidation and providing a conducive business environment will help improve manufacturing competitiveness, thereby expanding exports and driving future growth.

The ADB said exports are likely to be relatively weak this fiscal year due to slower growth in major advanced economies, but will improve in fiscal 2025.

Imports will grow faster than exports in 2024-25, driven by strong domestic demand, especially for capital goods and intermediate goods.

“Monetary policy is expected to continue to support growth as inflation weakens, while fiscal policy aims to strengthen the economy but retain support for capital investment. Overall, growth is expected to slow to 7% in FY2024, but will slow to 7% in FY25 It will increase to 7.2% in 2020, the ADB added. To boost exports in the medium term, India needs to further integrate into global value chains.

Net exports will continue to reduce growth in the current fiscal but will improve in 2025-26, the ADB said, adding that India’s share of global merchandise exports has remained stable in recent years.

A healthy 17% growth in central government capital expenditure in FY24 compared to the previous fiscal year, coupled with transfers to state governments, will boost infrastructure investment. New government initiatives to support urban housing for middle-income families are expected to further stimulate housing growth. Interest rates are stable and private investment is expected to be boosted.

“With inflation moderating to 4.6% in FY24 and further falling to 4.5% in FY25, monetary policy is likely to ease restrictions, which will facilitate rapid absorption of bank credit.

“Demand for financial, real estate and professional services will grow, while manufacturing will benefit from moderate input cost pressures, which will boost industry confidence. Expectations of a normal monsoon will help boost growth in the agricultural sector,” the ADB said. .”

The government is focusing on fiscal consolidation with a deficit target of 5.1% of GDP in FY2024 and 4.5% in FY25, which will enable the government to reduce its total marketing borrowings to 0.9% of GDP in FY2024 and provide Private capital creates more space. Department Credit.

India’s current account deficit will widen slightly to 1.7% of GDP as imports increase to meet domestic demand. Foreign direct investment will be affected in the short term due to tight global financial conditions, but will pick up in fiscal 2025 as investment in industry and infrastructure increases.

Unexpected global shocks such as supply line disruptions in the crude oil market and weather shocks affecting agricultural output are major risks to India’s economic outlook, the report said.

The overall health of the banking sector remains strong, with the sector’s asset quality continuing to improve, with total non-performing assets falling to 3.2% as of September 2023, the lowest level in 10 years.

Established in 1966, ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific while sustaining efforts to eradicate extreme poverty. ADB has 68 member countries, 49 of which are from the Asia-Pacific region.

For developing economies in the Asia-Pacific region, ADB expects GDP growth to average 4.9% this year as the region continues to maintain resilient growth amid strong domestic demand, improving semiconductor exports and a recovering tourism industry.

“Policymakers should remain vigilant, however, as there are many risks. These include supply chain disruptions, uncertainty about U.S. monetary policy, the impact of extreme weather, and further weakness in China’s real estate market,” the ADB said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)